Guerilla Investing

Sounds Greek to Me

2011-10-09T08:05:00.000-07:00

People who invest and trade in the stock market, mutual funds, and UITFs, would know what I'm talking about just by the title alone.

Those who don't, can just refer to the definition of that phrase.

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It's about what's happening in the stock market lately - locally and globally.

Three years after Lehman Brothers, we now have another banking system problem, this time from Europe, with the origins coming from Greece.

According to Wikipedia, Ancient Greece is considered by most historians to be the foundational culture of Western Civilization. So, Modern Greece will now be considered as the foundation of the second crisis crippling the globe. The first one was the States just three years back.

I won't offer to conjecture further about it. There are people more qualified to give their opinion about the situation. Further, there's enough news on the web, print, and TV so I am sure you've at least a bit of an idea as to what is happening.

However, I think locally, no one - outside the financial industry / and the investing public anyway - really cares about it.

The up side of having so many domestic problems is that you don't have time to worry about issues outside your national borders. Of course, that doesn't mean we won't be affected by it.

Plus, you still have a job, so I don't think that you'd be minding the prevailing crisis that much - yet.

But, if you're someone who's been investing (or just started to), you'd be worrying about what's happening to the values of your investment holdings.

If you're someone who invests, you are doing what most financial advisors and planners would term, increasing your passive income.

Active income is the money derived from blood, sweat, and tears - i.e. your job, business, your sidelines and moonlighting, etc.

Passive income produces blood, sweat, and tears if your stocks/UITFs/mutual funds falls below your cost of investment.

Just kidding. =)

Most people would like to have a high active income in the form of big paychecks, then also spend massively. It's a vicious cycle.

Others resort to multiple sources - sell beauty products, tutor, teach, etc. - to increase the income coming in.

Of course, if you are someone who is an employee earning just above the minimum wage, you will be doing the latter example. Or, you may have opted to work on foreign shores.

Nonetheless, the precondition to going into increasing your passive income, is to have an adequate active income with spending for expenses that's just right. Unlike Greece and most other nations, you should have a personal budget surplus.

Now, where do you put this surplus in?

You must find something that makes your money grow while you work, eat, sleep, play, etc. In short, without increasing your work load, you have an instrument where your money works for you.

I would like to think that a lot more people are going into the investment bandwagon. Bank deposits are not considered an investment, but they serve a purpose because they provide liquidity AND capital protection (unless you put your money in LBC Bank).

If you would like to know what an investment is, at least to me, it is something that generates returns higher than the inflation rate. Ideally, it should not be too liquid so that you are not tempted to spend it right away. And, usually, the returns are not guaranteed.

So, until then, appreciate the risk, then appreciate the capital.

Finding Solace

2011-09-22T09:15:00.000-07:00

After trying our best to withstand the sell off of the stock markets in other countries, our local index succumbed to the pressure. It comes as no surprise because as the cliche goes, no man (or stock market) is an island, even if you're an archipelago.

Investors and traders who witnessed the bloodbath in 2008 must be saying to themselves, "eto nanaman tayo" (here we go again).

Well, not exactly.

My opinion is that the government interventions made in 2009 paved the way for extra money to flow into the markets - whether in equities, minerals, etc. Now that uncertainty is back, the big players may be liquidating their positions, preferring to stay put in cash, hence the sell off.

Further, what's different is that governments worldwide have already used quite a bit of arsenal already. Injecting loads of money into their economies to stave off individual recessions in 2009.

So now, if governments can't do anything else, everybody's wondering if there's going to be a double dip.

And we're not talking about Oreos here.

What's left to do? Perhaps it's time to let the markets play out on its own.

Certainly, governments are scrambling to find ways to mitigate the crisis. What's an investor to do? Wait and see or do like Buffett - but when everybody's selling.

Stocks are usually forward looking, so the crash lately could mean economic hard times in the next few months.

Time to tighten your belt? Perhaps.

You wouldn't be hard pressed if you were able to set an emergency fund first before plunking hard earned money on real estate, stocks, bonds, or managed funds.

People have this notion that the best way to grow their money is to invest it right away.

That's not entirely correct. Before you decide on your investment instruments, you should set aside an emergency or savings fund.

An emergency fund represents 3-4 months of your monthly expenses. However, if you would like to be on the safe side, instead of expenses, use your monthly salary as your guide.

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LBC Bank recently closed shop. According to the news report, the reason is attributable to them offering higher interest rates than their peers.

As you know, if a deal sounds too good to be true, it probably is.

During financial crises, poorly managed financial institutions fold up.

The last time that happened locally, it was during the height of the US financial crisis.

Remember Legacy?

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I'm elated that some of the stocks I was talking about last year went up substantially, namely GLO and ORE. My mistake was with MPI (I will have to uncover why it is underperforming).

Until then, appreciate the (heightened) risk, then appreciate the capital!

*** Blogger is a lousy blog service. Truly. I had a long text and it just disappeared. I hope to use a more reliable service in the future. Sorry I just had to say it. ***

Market Mover?

2011-09-08T10:07:00.000-07:00

The mining superstar, or, at least one of the superstars, Lepanto Mining, saw its shares drop from a high of 1.82 last August 24 to a low of 1.28 today ("A" shares).

What is disturbing is the volume of transaction in the past few days, especially when the stock saw heavy selling.

What's happening? Well, basically there are two rumors daw. I say daw because that's what I heard. So it's up to you if you want to take it with a grain of salt. First is that the company is looking at doing a stock right. Second, there will be a postponement of the announcement to be made by their foreign investor Gold Fields.

Then of course, there's that unloading of LC shares because it's not part of the PSEi anymore. This is a fact. So index funds need to unload their LC to mimic the composition of the PSEi.

What happened in the past few days of course, forces traders to rethink their positions in LC. Today's recovery may just be a dead cat bounce. Investors, on the other hand, who truly believe that LC will become a profitable company one day may want to forget what has happened and just look to the future. Easy to say, I am sure.

There was also a columnist in the Inquirer who said that "According to unverified reports, the company is slated for a secondary offering—a development that could only be interpreted to mean that the principals of the company are taking their profits which, in turn, may send the message that no further initiatives are at hand to assure the continued growth of the company."

In my young experience with the stock market, stock rights usually negatively weigh on the shares of the company. It will take some time for its stock price to go up - - should it happen.

His article came out Monday. LC had a bloodbath the following days. Market mover?

Nah. Most likely it's the moves made by fund managers in anticipation of the Sept 12 shake up of the index. LC is being removed by then. If you're an index mutual fund with loads of LC, you can't sell those shares in just one day. I'm sure it is spread over numerous days.

San Miguel and Semirara will join the index, along with others who'll replace those that'll be exiting.

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It's interesting and also an encouraging sign to note that more and more Filipinos are looking for ways to build wealth (not just spend wealth). This is why paper investments have increased as well as hard assets like condominiums. The next logical step will be to have even more forms of paper investments and an increase in home equity loans.

When you buy property, you can actually increase your net worth right away by taking out a home equity loan. Unfortunately though, this money is fake money because it's not yours. I use the word fake loosely, of course.

Americans used this fake money to buy goods they didn't need. Look at what happened to their economy now.

The continued launch of new projects is sure to increase property prices. Because logically, you can't sell new projects at a cheaper price right? For one, prices of construction materials will go up as construction demand goes up. Further, the developer can't price its new projects lower than their old projects because that will be saying that their old projects are overvalued. They will also risk the ire of their investors.

Property, while generally safe, is not immune to price activity. Prices do not fall on a straight line upwards. Time will come that it will plateau, or, actually go down.

I'm sure property advocates will not agree with me. hehe.

But ponder on this, if stocks are priced based on earnings, what or who determines the price of a property? The developer or the market? Ultimately it will be the market. So when the market is riddled with sellers, like the stock market, prices will go down.

Anyway, that's it for now.

Until then, appreciate the risk, then appreciate the capital!

It's Mine!

2011-08-21T07:19:00.000-07:00

The last few weeks and days were very volatile days for stock market traders, enthusiasts, investors and speculators. Some may have made money (given an equal amount of heightened risk); but, most, I believe, have lost money (or paper loss, depending on your circumstance).

Surprisingly or unsurprisingly for some, the mining index of the PSEi bucked the trend, albeit with the exception of the last few days of the week ending August 19.

In fact, a lot of the mining stocks have made 52 wk highs...

52 week highs -

LC hit 1.58 last August 19 (surprise!)

PX hit 28.95 last August 16

MA hit 0.072 last August 12

ZHI hit 1.37 last August 8

NI (special mention even though it didn't make 52 wk high, it's increased from 2.24 in August 1 to 3.43 this August 19)

ORE hit 5.12 last August 4

DIZ hit 11.76 last August 16

Did not make 52 wk highs

NIKL

The list above is not extensive, but you should get the picture.

Most of the mining stocks with gold production or gold claims went up. Those with minerals meant for manufacturing like AT and NIKL (except NI and ORE) performed poorly vis-a-vis their mining peers because if the world should fall into recession then there'd be manufacturing slack. So there could be a rebalancing of portfolio by fund managers and investors.

I've no idea why NIKL is not performing given the good earnings report recently (sell on news perhaps?). NI and ORE outperformed the PSE index (and NIKL). ORE has just started reporting earnings (which obviously bodes well for a stock) and in fact if you read the news, there is FOREIGN BROKER coverage. What a big turnaround.. those of you might remember that after ORE listed, there were some questions about its mining claims. Going forward, should the uncertainty about the global economy subside, NIKL could be one big winner for those looking for quality mining stocks.

While NI. Hmm, I have to check more news on this one. NI was supposed to have some good story to tell but it never did materialize (i.e. no news). NI was part of the triumvirate of GEMINI speculation (i.e. GEO, MIC, NI) in the years 2006 to 2007.

There were other non mining issues which recovered well. Some index stocks just couldn't pick up though and instead fell through the roof. Have you seen MEG? Better not catch a falling knife.

If there's anything else that will be an offshoot of a successful mining industry renaissance, it would be the demand for geologists and engineers. Goodbye nursing hello engineering and geology? There could also be a demand for Chinese speaking translators as a big chunk of the demand for minerals would still be from China.

In the meantime, I think that a cautious approach is better especially if you are a trader. For investors, the time is almost ripe to continue to accumulate shares. If you can't stand the volatility, it's time you entrusted your funds to people more knowledgeable than you.

Until then, appreciate the (heightened) risk, then appreciate the capital!

United Shakes of America

2011-07-31T08:09:00.000-07:00

So, the US averted a near default by raising the debt ceiling. But according to the same news source, ratings agency, Fitch, says that the prized AAA rating of US debt may still be downgraded. In just a matter of three days, the US (stock) market sank. The Dow Jones has fallen by over 1000 points since its peak. The S&P on the other hand, is no better and the bad news continue to pour in as there were people saying it has formed a head and shoulders formation (a bearish pattern in technical analysis). I imagine that if the debt ceiling was not raised, far worse things could have happened.

A lot of countries hold US debt, especially China. We (The Philippines) are no different and in fact, the BSP is contemplating diverting some of our funds away from US debt. So, will US debt become subprime as well? I am sure that they will get their acts together, otherwise, we will have a lot of countries none too happy with what is happening. Think about it, if you are holding US debt, and the debtor seems unlikely to meet his obligations, what would you do?

At a personal level, what is happening to the US is similar to you as a consumer maxing out your credit card limit. Further compounding this is that you only pay the minimum amount due. So by the time you are able to pay off all your outstanding debts, you would have been charged more interest than the principal amount.

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I had been thinking about whether or not to post that the local stock market would be in for a correction soon. But when the PSEi sank close to 60 points the other day, I knew that I had to.

We've been going up and reaching historic highs recently. So far, listed companies have had positive earnings. However, I know that some ominous signs are there.

Lately, it has been the basura stocks that are being actively traded. If I remember right, that's usually the last wave of the current bull run. Late entrants to the stock market may want to hold off on the purchase.

It doesn't help that Mr Mobius thinks our market is getting expensive.

So far though, with the exception of the correction the other day, our market has been holding up despite the worldwide sell off, especially the mining sector. Still, the skeptic in me thinks that our market will just need to take a breather for the meantime.

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The American Dream has now turned into a Nightmare. I just hope that we don't have our own bangungot.

Until then appreciate the (heightened) risk first, then appreciate the capital!

Risk Appetite is Back.. Yum Yum!

2011-07-15T07:44:00.000-07:00

Since my post last May 5, the local stock market has risen quite substantially with mining stocks taking the spotlight.

I suppose that taking a vacation from my blogging was reasonable given that there wasn't much to talk about. Though on hindsight, it could've been a chance for me to trumpet to investors like you and me to take up positions on the cheap. Hindsight is not only 20/20 it's also 100% painful once you think about the things you should've but wouldn't.

Modesty aside though, I did take up small positions in the two stucks I was looking at during my last post, namely SMC and LC. At ngayon, hindi ako nag CCC heheh.

SMC did eventually fly, TWO MONTHS after; basing on my last post date. Then again, in that two months, my money earned more than what I would have earned if I had put it in a savings deposit 10 times over. If there were more people thinking along those lines, bank managers would face a major problem in maintaining their CASA objectives.

LC also gained quite substantially, along with other mining issues.

You see, if the PESO is increasing, so is the stock market, and so goes for commodity stocks. This trend I have noticed. This trend is also coupled with numerous positive news in the public.

One headline states -

UBS expects surge in IPOs

I recall that when there was a huge surge in IPOs, a huge downtrend also ensued thereafter. Hmmm. Gets me thinking that we can either earn some short term fast money; or, you can opt to liquidate your stuck positions at prices that are breakeven for you.

Another headline states -

PSE all set to extend trade hours

Well, the last time the PSE instituted a change, the market made a strong positive statement. Investors and traders alike saw their fortunes rise last year. The change I am referring to is the change in board lots; or rather, the elimination of it. Change is good!

Going back to my earlier point about having a chance for some short term gains; I say this because of this one other headline -

More portfolio investments coming Philippine's way - BSP

The last time that happened, you saw the stellar performance of equities in 2010. Traders are happy when there is an increase in foreign participation; however investors, may not be so happy because they know that foreigners can as easily sell off their shares.

Why is foreign participation a bane when it comes to selling? It's because the local market participants cannot absorb the volume. If we have major, major participation from local (i.e. Filipino) traders and investors, then the buying volume can match the selling volume. It's hard to explain this on paper. Perhaps I'll try in the future.

The syncing with the other ASEAN bourses should provide buoyancy for our market. Though I speculate that volatility will be the name of the game when that time does come.

Nonetheless, the next five months should be quite interesting. A lot of idle 'basura' stocks have just been resuscitated, like PWR and LIHC.

I am just amazed by the shortening cycle of the bull and the bear. Whereas before the transition from bear to bull was drawn out, now, it's only as long as three to four months. I'm excited with this development because that means there are now more local players compared to before. Products such as UITFs, Mutual Funds, and Variable Life Insurance have surely aided the information dissemination to the investing public. All good.

Perhaps now, Filipinos are gravitating towards non-guaranteed instruments (I use this term loosely of course).

After all, if you are in safe instruments, you are guaranteeing one thing - a sure rate of low return. It really depends on whether you want the risk or the return. Higher risk means higher returns; and vice versa.

Until then, thanks for reading... so appreciate the risk then appreciate the capital!

SMC, sleep muna corporation

2011-05-05T07:29:00.000-07:00

I've been so out of touch with the local stock market and more so with my blog for quite some time. There were some opportunities in the stock market but slowly, I am realizing that if you don't have the time, you just entrust your money to fund managers via mutual funds.

However, greed is preventing me from going the route of investing in mutual funds. Hehe.

I know I've got lots of things and ideas I'd like to share about personal finance; unfortunately, as I've come to realize, interest and time is usually inversely proportional.

On top of this, when I started this blog, I failed to plan ahead. I didn't come up with a list of topics to talk about. So there were periods of drought, as was the previous month/s. I hope that stops.

I've been out of touch that I didn't know (nor feel) the secondary offering of SMC. Prior to its closing, it was trading between 150 to 170. Since it was offered at only 110, it closed down today at 109.50. At one point it was at the low of 105.70. I do have faith that the share price will make a strong rebound; but, it will take some time, given the volume of shares that just made a tsunami in the market.

I also had plans of taking positions in LC (Lepanto, a mining stock) with the strategy of buying and forgetting all about it. I just didn't do it yet due to one, lack of funds hehe; and, two, I'm waiting for a good entry point (will I still get it?). I'm hoping it would.

I fear of recommending anything for the mere fact that I have not been actively monitoring stocks for some time now. Couple that with the lack of a good charting software, I'd be wary of touching anything that I don't plan on holding for a long time. So basura stocks, it may be time to say good bye and not good buy.

It's funny, during the first quarter, I was waiting for the market to rebound. Now, I'm waiting for the market to correct. Every time I'm about to make a decision, the market isn't cooperating. Mutual funds, here I come?

If there's anything I'd like to impart, investing in mutual funds is the easiest boring way to earn passive income.

See you soon and do constantly drop by. I hope your patience doesn't wear thin. =p

Hello, Hello!

2011-03-23T07:48:00.000-07:00

Wow, it's been a month since I last posted.

My posting and updates have been intermittent since 2011 started. I won't offer excuses.

Everything has been a blur for me, with the stock market down. I got a bit emotionally attached to the market, hence, I became detached from my blog. Tsk tsk.

And in between, there's the chaos in the Middle East, the quake in Japan. So much happening and it's just three months into the year!

As for the local stock market, it seems to be gaining some direction, at least for some select stocks.

So, perhaps it is safe to say that by 2nd quarter, people may start to accumulate stocks again. Of course, barring any more natural disasters and geopolitical issues. Worrisome also are the OFWs' job security. Key indicator to look at going forward would be the growth (or flattish?) remittances compared to 2010.

Anyhow, back to my real work. I shall update you once again, my dear blog, and of course, for the benefit of you, my faithful readers.

Until then, don't forget to increase your emergency fund and invest wisely.

State of the Stock Market

2011-02-19T07:23:00.000-08:00

Surprise, surprise.

It's either I wasn't any much interested in the local stock market anymore; or, I was just plain busy these days that I didn't notice that Megawide (Ticker MWIDE) listed just this Friday (Feb 18).

Or.... I just didn't have the funds.

Not that I lost a big opportunity anyways, as the title of the news article in PDI online says -

"Megawide lists stocks, closes at IPO price of P7.84/share "

It closed at the IPO price??

Even the fact that the owners of MEGAMall, i.e. the Sy family, buying a chunk of the shares did little to up its IPO performance.

If memory serves me right, the same thing happened with the listing of Anchor Land in 2007 I think. The IPO was lackluster even though the Sys bought a stake prior to its listing.

Oh well, as they say, history does repeat itself in the stock market.

Speaking of repeating itself, I remember during my class in RFP, Mr Efren Cruz did mention that stock markets are on its peak if there are many IPOs.

While I don't consider the recent IPOs as that many compared to 2006-7, it does mean that the conditions in the stock market have been ripe and, to quote an often used phrase of stock market analysts, "valuations are good". Or, in layman's terms, people are willing to part with higher amounts of money so the corporation gets more funds per share.

It also means that when the stock market is on its peak, it will be a prelude to a market correction. So, history is repeating itself. The key difference though is that the correction may not be as dragging as it was in 2008.

On hindsight, the correction set the stage for a banner year in the local stock market in 2009-10.
So will the second half of 2011 be like that? Hopefully...

To continue, since the conditions have worsened recently, Filinvest Development Corp deferred their planned secondary offering with no commitment date. San Miguel Corp. also deferred their plans, but said it would be sometime March.

Pertinent text from the news item -

Start quote

SMC president Ramon S. Ang earlier said the company wants to proceed with the sale of as many as 1 billion common shares valued at P200 to P250 per share within the first quarter.

At the high end of that price guidance, the follow-on offer will be worth P250 billion, proceeds of which will be used to accelerate SMC’s diversification away from its traditional businesses of food and drinks into infrastructure and mining.

Market watchers agreed with the sale postponement, saying the company can fetch better values once the market settles down.

End quote

Well. Even mighty SMC succumbed to the mightier stock market.

If I were you, I think it's best to take a vacation and just re-evaluate the stock market come second quarter.

My only hope is that the market doesn't sink lower; and, the BSP be clear whether or not they will raise interest rates, inflation will indeed go up.

I mean the taxi meter already started inching up. Others (food prices, toll, etc you name it) may soon follow suit.

Abangan.

Down..on your luck?

2011-02-08T05:39:00.000-08:00

The market now has a direction: Down.

Last year, the PSEi went up by more than 30%. Now, we're down by about 10% already, if I remember the news correctly.

In between there were a lot of superstar stocks like Aboitiz Power (AP), Semirara (SCC), DMCI (DMC), among others, that went up more than 50%.

I don't know how many were able to enjoy the ride of the aforementioned stocks. If you're one of them, then congratulations to you!

While experts and pundits will say that stock selection is a skill, you still need an element of luck on your side.

Few - if not none - business books will tell you that luck is also needed to be successful in business. I think that applies also to stock trading (and not investing).

People of course will question the credibility of a business book if luck was somehow placed in the equation of success.

I say that luck is important because I've had experiences in the past when I bought a stock and then it just goes up. I've also had experiences counter to that of course, i.e. for no reason it goes down. And when I say "going up" or "going down", it's more than 10%.

Mostly these are small to medium companies that get jockeyed for what reason, I don't know.

Of course, this is not to say that you if you are "unlucky" in stocks you should choose to avoid it completely. By unlucky, I mean if you have only made money 1 out of 10 trades you've made.

You don't have to stress yourself by choosing what to buy. Go to a professional and get yourself a mutual fund or UITF.

The commission, fees, charges that you get billed for are well worth the stress.

Until the next post!

Izzzz baaaacccckkk!

2011-01-27T08:07:00.000-08:00

Dear faithful readers and visitors,

I'll be back to my posting ways soon...

My last post was November 23, 2010. Today is January 28, technically.

I've been busy and in the midst of some changes; but, once this is behind me, I shall resume my posting schedule, which is once a week.

The market has made a lot of noise (not) last December up to today. Now the index is below 4,000 if I remember correctly.

Sentiment has turned sour (for the local scene), I'm sure. But it's just how money is in the world.

Once upon a blue moon, money was in this side of the world. Now, it's going back to the States. If you haven't read the news, "hot money" was at an historic high in the Philippines last 2010.

These are just funds which pour into investments, usually paper investments like stocks. That's why everything was going up last year. So, you can say that the stock prices went way ahead of the companies' ability to earn and make money.

So what does it mean to us Juan dela Cruzes?

Now, we local folks with only a few bucks joined the ride last 2010 thinking that the joyride would never end. Well, local folks, the rug has been pulled under our feet.

Let's say foreign fund invested 1,000,000 pesos in Stock XXX. You on the other hand, invested 10,000 pesos. Assume for an instance that the stock price is at Php 1.00.

The foreign fund wants to liquidate his/her entire position. If the posted buyers for Stock XXX at a certain price point is only at 100,000, then the foreign fund will sell all the way down just to satiate the 1,000,000 position. That's why falling stock prices are painful for small fries like you and me, suwertehan din minsan, kung nakapost ka sa magandang presyo..

So when foreign funds are exiting the country, there is indiscriminate selling. Consequentially, us locals will just see our paper gains disintegrate to more realistic levels.

Good long term, bad short term I suppose. Will happier days return? Perhaps towards the latter part of the year.

I mean everything's going up, primarily in the transport sector, not only in terms of prices but also in attempts to blow them UP.

If the transport sector charges higher fares, then it's natural that food costs will also increase since food is delivered port to port, manufacturer to outlet via transportation. Transportation is the backbone. This would then start a cascading of price increases.

As one broker friend once told me, inflation is a given.

The crucial thing though is that people will get used to higher prices, but it will take some time.
And when they do, then corporate profits start trickling in, and eventually stock prices get propped up.

But you know what? Having worked in the FMCG sector in the past, January is almost always the month when most companies announce price increases. Just in time for retail outlets to flush out all their 2010 stocks.

New year, new stocks, new prices.

Speaking of stocks.... let's backtrack a bit....

When you're a small fry in the stock market, it's best you protect your gains. A lot of so called experts will always tell you about money management.

But personally, money management is dependent on the amount you are investing.

Some experts forget that not everyone can invest more than P 20,000 in the stock market. So money management for the conservative stock investor will strictly be a one-stock affair. It won't be about how you apportion your funds.

Oh well. Enough for now.

I'm back! Thank you for dropping by.

Sincerely,

Guerilla Investing Blogger

A penny for your thoughts, a nickel (asia) for a kiss (UPDATE)

2010-11-23T05:08:00.000-08:00

Thanks for being patient, my dear readers. You guys are the reason why I keep coming back to post. Unfortunately the previous weeks were a mishmash of busyness and inability of my network provider to, well, provide my connection to the interweb. Inasmuch as I was busy then, the market has also been that way, there was a lot of action, including the long awaited (?) correction everybody was warning about.

I previously said that the next post would be a continuation of the IPO's, particularly on Nickel Asia. As fate would have it, the stock has already been listed on the board, passing by the time I should've and could've updated this blog. Anyway, it does make this post more interesting to write; and, hopefully more interesting for you to read also.

The offer price was in the lower end of the band, priced at 15 apiece. On its debut, the stock opened at 19, rose to 19.40 then went pft to close at 16.50. At the close, those who were lucky enough to get a chunk of the offering earned 10%. Not that bad considering that Cebu Pacific (Ticker CEB) opened at 132, to close at 133, with an offering price of 125, a gain of only 6%.

While the gain for CEB was quite modest at best, at least it still went up even though the offer price of CEB was at the high end of the price band.

NIKL had a price band of between 15 to 22. According to a broker friend, he said that pricing it at the lower end does not give a good impression. Think of it this way, if you were in an auction, and nobody was bidding up the art piece, then it means that people think the starting bid is already a good price.

On the other hand, setting the offer price at the lower end does give investors or investor-speculator-traders more upside, as proven by the 10-26% gain of NIKL compared to the 6% of CEB.

Now there's the IPO of IP Converge. The ticker will be CLOUD. While I do hope their IPO will point to the direction where clouds can be found, I do have my doubts. The local stock market is in a breather phase, and its parent company, IPVG, is not behaving as JGS did when CEB was about to list.

I checked the prospectus of CLOUD, IP holds 90% of its common shares. Price will be at 8.80. If you want to check out the prospectus, click here. It's 158 pages long, so you've been warned. Listing date is slated on December 9. Offer period is November 25 to December 2. Dividends were declared last Feb 3, but it's just at Php 5M or about Php .03 per 1 common share, if my vague remembrance and understanding of the definition of common and outstanding shares serves me right.

I hope with the above, you've had some basic info about the next IPO. IPO's are usually a way to make a quick buck. Unfortunately, making quick buck, at least in my opinion, is not about investing, it's more likely you're behaving like a speculator. So determine what you really are, before you partake of the IPO.

Nonetheless, there may be a speculative play in IP, I think. This will be similar to how ORE behaved because of NIKL. I was right with the ORE play, but I can't be right all the time. This is pure speculation. So again, buyer beware.

News came out recently that the IPO price of CLOUD has been reduced to 4.2, or half of the original price range. Here are the news take aways -

First paragraph -

MANILA, Philippines—Data services provider IP Converge Data Center Inc. (IPC), a unit of publicly listed technology IPVG Corp., has priced an initial public offering at P4.20 per share, cheaper than the earlier targeted price range.

You find the "incriminating" paragraph in the fourth paragraph -

The IPO was priced below the indicative range of P7.04 and P8.80 per share, seen to make the offering more attractive at this time that the stock market is undergoing a consolidation phase after retreating from all-time highs.

Key common sense questions to ask -
1. If you're confident with what you are selling, are you going to offer it for a bargain?

2. Why isn't IP moving up; or, at least showing some strength in the market? It seems the direction of the stock price has already "predicted" that this will be a lackluster IPO.

(I looked at the price chart of IP; and since October 26, it has not been doing anything but go down.)

Given this, IP may not provide the returns of an IPO play similar to JGS and ORE. I will however, review this stock in the days leading to the IPO of CLOUD. That's probably after December 2. Keeping my fingers crossed.

Until then, appreciate the risk, then appreciate the capital! In the meantime, why not read my previous posts? ;-)

By the way, closely monitor the tensions between the two Koreas. Geopolitical events often cast a shadow on stock markets. With this happening so close to home, stocks may either further correct or move sideways for some time. Buying opportunity? Perhaps, if you're an investor. But it's always good to stay liquid and wait for a better timing.

IPOze

2010-10-28T07:54:00.000-07:00

Last post I left with a teaser on ORE, a mining stock.

I don't have any information about the stock except that - from the grapevine (mostly online forum/s) - it has the highest grade nickel in the country.

Well, common sense dictates that if you have the highest grade of something, you get better prices for your goods. And, when you get better prices, that means you get better revenues, ladies and gentlemen.

Recently, by coincidence, there was a news release in the Inquirer (website), just this October 26, entitled "First nickel shipment eyed by December". For your ease, the meat of the news is found in these paragraphs -

The mining unit of publicly-listed Oriental Peninsula Resources Group Inc. (ORE) is scheduled to deliver its first shipment of high-grade nickel ore to Japan and Australia by December 2010.

ORE chairman and president Caroline Tanchay said ORE’s subsidiary Citinickel Mines has been operating since August. “If not for the heavy rains in Palawan, Citinickel could have produced more. However, I’m glad we can finally ship out high grade nickel ore which is good news for our shareholders,” Tanchay said.

The scheduled shipment follows the signing and submission before the Regional Trial Court last August of a compromise settlement that puts an end to the long running dispute between Citinickel and erstwhile rival Platinum Group Metals Corp. (PGMC).

Good news indeed? So far, this hasn't been a "sell on news" story.

Well, let's review the price action since my last post.

Oct 20: Open 3.28, High of 3.48, Close 3.40
Oct 26: Open 3.49, High of 3.69, Close 3.61
Oct 27: Open 3.70, High of 3.74, Close 3.65
Oct 28: Open 3.65, High of 3.70, Close 3.60

Notice anything?

What's the spread of October 26 and 20? 20 centavo run from the open to the high, then an 8 centavo retracement from the high to the close.

Then there's the .11 difference in the opening prices of Oct 20, 26, and 27.

The spread though on October 27 and 28 had been thinning. The closing price today suggests a bearish trend for the stock given the lower close vs. October 27's 3.70 opening price.

Prices don't lie. Then again, perhaps I'm just over-analyzing.

Even with the possible bearish trend of ORE, it may enjoy buoyancy in the coming days as Nickel Asia is listed through an IPO. I looked at the prospectus and my it's hundred pages. I suggest you also do your research. The link I put here has another link to their website and provides some legalese that's best read by you.

I remember though that there was a summary version of this and I was particularly interested with the item on dividends policy. I skimmed through the (new) hundred page document and found this instead -

"Upon completion of the Offer, our dividend policy entitles holders of Shares to receive annual cash dividends of up to 30% of the prior year’s recurring attributable net income based
on the recommendation of our Board of Directors. Such recommendation will take into consideration factors such as dividend income from subsidiaries, debt service requirements,
the implementation of business plans, operating expenses, budgets, funding for new investments and acquisitions, appropriate reserves and working capital, among others. See
“Dividends and Dividend Policy”."

Portion of the "Dividends and Dividend Policy"

"We paid cash dividends to our shareholders in 2007 and 2009 in the amounts of 81,611 million and 8142.2 million, respectively, and paid a 150,000,000 share common stock dividend in September 2010.

We did not pay dividends in 2008 because we were conserving our cash in anticipation of making an equity contribution in respect of the Taganito HPAL facility project. On August 13, 2010, our Board of Directors declared a cash dividend equal to the peso equivalent of US$70 million, which is scheduled to be paid no later than three days following the listing of the Offer Shares on the PSE to shareholders of record on August 31, 2010."

I cannot say with confidence and certainty that the CEBU PACIFIC IPO Prospectus contained no such information as I didn't bother to read it. I just happened to view the Nickel Asia prospectus recently so I wanted to learn more about their upcoming offering.

The IPO of Nickel Asia will spur interest in stocks that are in to the nickel business. This means ORE will attract attention, in my opinion. So, there may be trading opportunities for ORE even with the possible bearish move.

Anyway, that's it for now. To be continued in the next post. Until then, appreciate the risk, then appreciate the capital!

Mine's Here!

2010-10-20T05:02:00.000-07:00

Dear readers, thank you for being patient. As promised last week, I am back with a new post. I'll just make some stock market commentaries, a short review of my stock trade forecast, and another long term stock you may wish to add to your portfolio.

I hope stock market enthusiasts have made money in the recent weeks. For the others who don't know or care about the stock market, maybe it's about time you did. I'm not surprised that most haven't.

Continue stocking up on the stock market...

Based on this news piece from the Inquirer,

"THE Philippine Stock Exchange estimates that less than 1 percent of the Philippine population invest in the stock market, but exactly how many people are we talking about?
Based on the latest headcount, that figure may be about 400,000—slightly less than the holiday foot traffic at SM’s most populous malls. This number covers the active retail investors, defined conservatively as those who trade at least once a year.
By demographics, local stock market investors usually are aged 30 to 50, majority of whom are male. About 35 percent of them are Chinoys, according to the PSE. "
And, if you're worried that maybe it's too late to enter the stock market, perhaps the last paragraph of Dean Somera's post would calm your nerves. If you don't want to go to the link anymore, basically this is the meat of the entire article -

"With the oversubscription of the CEB IPO and very positive public reaction to the SMDC SRO, market outlook is encouraging. And, if the market bulletin of one stockbrokerage house is correct when it said that current “foreign participation is only about P50 billion monthly versus the P100 billion monthly in the 2007 rally,” it seems that there are more money available to bolster current market momentum and direction."

With regards the CEB IPO, according to a news article in Inquirer, the local portion of the offering were "all sold". Some more "praise release", I suppose -

"This will be the largest IPO by a low-cost carrier in the Asia-Pacific to date. Its parent firm JG Summit expects to raise as much as P23.3 billion ($539 million), without having to exercise an option to sell even more shares.
The IPO is one of the largest ever conducted in the Philippines, and the largest Philippine IPO in US dollar terms."
Now, the question is, what will these IPO takers do on listing date? Sell the shares for a quick buck or hold it for the long term? My oh my, Php 23 Billion, then there's that transaction between Mang Inasal and Jollibee worth Php 3 Billion. These piles of cash should go somewhere!
I sure hope I get to be the kind of entrepreneur Mr. Sia is.

Reviewing my recommendations...

These recommendations were made September 24.

1. Atlas doing a correction - I was right. What I was wrong with was that after the correction, it went even higher to hit 18.32. Then again, I did say that,

"But if you're no expert (like me), you might as well just hold on to it as long as you've padded that many profits since you bought it at 10.50 ."

2. DGTL - I was right that you should not choose DGTL. This stock tanked after a gap up...

3. APC - And I was wrong with APC, as it also tanked on Monday, September 27. It opened higher than the Friday's close only to close lower than Friday. Then a week later, it just broke out to 0.86... only to fall back down to 0.76.

4. MPI - It didn't correct. I was anticipating a correction but it never made one. So if you're a long position trader, then I'm sure you're (still) happy with this stock.

The market didn't correct in the one to two weeks period I said after the Sept 24 post but this week, the market has taken a breather. This is a good respite so that people "late in the game" can still come in to participate in the stock market. The correction has been slow in force, and I suppose that's a good sign, rather than a one time steep correction.

Long term stock

I've said that I look at holding long term growth stocks based on common sense and reading the news. These are the primary reasons why I chose Atlas and Metro Pacific.

One stock that has caught my attention is DGTL. I don't know much about fundamental analysis so I won't try to be a genius and interpret their FS. What I know is that part of their business is the Sun Cellular brand - which recently claimed that they already led the other cellular networks in postpaid subscribers.

If you pass by any Sun Shop, you'll note that there are many people queuing in line to transact business, be it to pay bills or to apply for a postpaid line. With just a Php 250.00 monthly bill, anyone can get a postpaid line from them.

The story for DGTL at least for me is something like Cebu Pacific. Cebu Pacific has certainly come a long way. It took years to build but their business has certainly paid handsomely for its principals. Similarly, Sun Cellular was once a small player in the local duopoly of Globe and Smart. Look at where it is today and you'll know that in 1 to 2 years time, DGTL may fly the way PLTL did in the early years of this century.

The two problems with DGTL is

(1) their landline business, which probably pales in comparison to PLDT. Nonetheless, their venture into broadband internet should provide ample opportunities for growth.

(2) playing in a mature industry - the telco industry. The only thing these guys are doing is eating away at each other's market share. I doubt there's much growth in this sector, compared to the mining industry.

Some dark horses

GLO, a battered telco stock has recovered much from its low of 773, more or less, this year. A part of me is telling me that GLO may come out as a surprise by 2011. GLO is a dividend stock and is also an Ayala company. Ayala companies are known to give value to shareholders. They recently announced a share buy back program for AC.

Why GLO? Have you seen the number of people flocking to Globe business centers? Their aggressive marketing seems to be paying off. A company that invests in marketing will certainly see results. I think that they have a chance at eating at Smart's share of the postpaid business (and not Sun).

Another dark horse is ORE, which is why my title is "mine's here". M-ORE on this in the next post. ORE, unlike GLO, is a purely speculative play. If you consider Atlas to be speculative, then ORE may already border on gambling for you.

Until then!

Interim Post circa October 15

2010-10-15T07:50:00.000-07:00

Dear Readers,

Thank you for always dropping by my blog. As I'm sure you've noticed, there hasn't been an update for quite some time. I've just been so busy with my day job that I didn't have time anymore to update my blog.

I'm writing this update post just to let you know that I'll be posting something soonest. Hopefully, the upcoming week will be relatively lighter compared to the previous ones.

Those who've been holding Atlas and MPI for the long haul should be jumping with joy as their stock prices just refuse to go down. (Actually most stocks, that correction still hasn't come... convincingly. I wonder if we will see one?).

Going forward, I'm looking at a telecomm stock that could potentially be a good boost to your long term portfolio. I'll discuss this more in the next post.

Anyhow, as I always say, appreciate the risk, then appreciate the capital!

Regards,
Guerilla Investing

Stock up on Stocks!

2010-09-24T21:00:00.000-07:00

My Dear Guerilla Investing readers, thank you for being patient and coming by every so often. I've been busy with my 8-5 that I just couldn't find time to blog the past two weeks. For this week's post, I'll take a break first from my post about using credit cards to comment about the recent activity in the stock market.

I'm happy and surprised about the way the stock market has been performing since my last blog post. It's made a new historical high already and everybody seems to be in euphoria expecting the index to track higher and higher.

A local brokerage report anticipates the PSEi to go to about 5,100 by 2011, then there's another report by a foreign brokerage house that the PSEi will go beyond that to about 6,000 or more.

In fact, as a testament to the growing interest in the local stock market, Credit Suisse will open business here, to quote an Inquirer news item -

"Zurich-based global financial services group Credit Suisse is setting up a stock brokerage in the Philippines, reflecting the resurgence of foreign investor interest in local equities, which are now trading at record highs."

Exciting and interesting times are indeed ahead.

You can bet that a lot of the financial institutions - banks, insurance companies, brokerages - will earn big bucks in the year to come as interest by the investing public gains momentum. The momentum will surely boost the financial houses' trading gains.

Local Flavor

I've always maintained that there are now more local investors compared to years past; and, while foreign "hot money" is needed to elevate the stock market and perk up trading volume, we don't have to rely on them as much as we had to in the past.

Check out this piece of news -

Since the start of the year, the PSEi had gained by another 1,000.64 points or about 33 percent, making it one of the best performing bourses in the region. In 2009, the PSEi rose by 63 percent but mostly on thinner trading dominated by local investors.

While the volume was thin in 2009, our index still rose 63% - mostly due to local investors. Now imagine, with hot money flowing into the country then most likely the PSEi will make history again and again in the coming months, if not years. With the hot money coming in, the peso will also most likely appreciate.

This scenario is similar to the years 2006 - 2007, in my opinion.

Don't be too greedy

Right now, the market should be poised to correct.

All the index bellwether stocks have already gone up a mile and the second liners have also ran their course. The basura stocks are gaining momentum, which to my memory usually precedes a market correction.

Most of the counters gaining recently were the mining stocks, with one of my recommended stocks - Atlas Mining - leading the way (prior to Lepanto, that is). Even some mining stocks with no "stories to tell" (at least to me) went up like CPM, NI, and ORE. PX has since sputtered a bit after hitting a 2010 high of 17.

Atlas Mining may also correct in the week ahead. While I've recommended that this is a long term hold, you may do well to join the profit taking for your trading positions, if any. But if you're no expert (like me), you might as well just hold on to it as long as you've padded that many profits since you bought it at 10.50.

My other recommended stock may also be teetering on the brink of a major correction. I'm pointing to Metro Pacific or MPI. I'm closely monitoring it.

What I missed though was the major major (hehe) run-up of Lepanto Mining. I really felt bad that I was not able to join in, but I felt better when I read Mr. Gus Cosio's blog post last September 22, and I quote -

"Unfortunately, I was not able to take advantage of the big move in LC. I don’t mind because I do not flatter myself that I can spot every stock that moves."

I realized that I'm never going to be able to join in all the "gravy trains" of all the stocks. I just have to make sure that I'm able to gain a trading profit and always remember to cut losses, should the case be needed.

Trading Stock Focus

Mining stocks may really be one way to boost your portfolio. A report just came out recently that minerals outputs went up by 50%! Imagine that.

When the blue chips and second liners have made their uptrends , there's bound to be trading opportunities for the smaller stocks. Two stocks I saw that may be good to trade are APC and DGTL. APC suddenly went up near the closing hours for no reason and is pointing to an apparent breakout from its recent downtrend.

As my experience tells me, breakouts are always good trading opportunities and usually run their course for 3 days. With Wall Street trekking triple digits this Friday, I'm sure APC will have a follow through buying on Monday. Keep your fingers crossed, mine are.

On to DGTL. DGTL made a nice move on Thursday close. Then followed it up on Friday after news came out with Sun Cellular claiming the lead in postpaid versus giants Globe and Smart. The stock swung wildly, going up and down and up.

I checked the chart today, there's a gap up on Friday. On Monday we will know if DGTL will continue going up, or it was just a one day wonder. Gap ups, as far as I can remember, are a positive sign.

Between APC and DGTL though, I'd choose APC.

Of course, I'm assuming that if you, dear reader, plan to trade any of the two stocks, you have at least three to six months of trading experience.

You need at least some trading experience to know how to time your entry and exit points.

I can't teach you how to time, as I'm still learning the skill as well. It won't be perfect, so don't fret if you don't buy at the lowest price and sell at the highest price. If you do, then chances are, it's greed that's driving your motive.

Some guerilla tips on trading

For those who don't have as much experience, I proffer the following guerilla tips on stock trading -

(1) You don't have to buy the stock at the open. I've noticed that the time between 10AM to 11AM is a window of opportunity to buy a stock at a better price.

(2) Compare the buy up and sell down volume. If there's more sell down, it can mean two things - the insiders don't want it to go up yet; or, it's just a one day wonder. Better choose fear over greed. There'll be other stocks to trade anyways.

(3) Look at the quality of the buyers. Who are the brokerage houses buying? Of course, you will have to expect that if these are small stocks or basura stocks, there will be no foreign stock brokerages buying that stock. Try to know if the brokers are familiar names.

I think I've said too much already. Remember, the market is most likely going to correct soon since the blue chips and second liners have already started tapering off their gains. The second sign is that the small stocks have really gone up so much. I can't point to the exact date of the correction, but it will happen next week or the week after, so tread carefully.

As I always say, appreciate the risk, then appreciate the capital!

Using Credit Where Cash is Due

2010-09-05T06:03:00.000-07:00

You've probably heard personal finance gurus, authors, etc. saying that when you purchase something, it should always be in cash. While that is true in most cases, I believe that using a credit card is far superior than paying in cash, provided that the payment term is full settlement at the swiping machine.

I say full settlement because some retailers continue to impose a different price when you pay on (supposedly) 0% interest rate term, usually in 3, 6, or 12 month tranches.

The cash and card price are often the same. However, if you ask if they have promotional offers like 0%, some retailers give you a different price than the one reflected on the price tag. I know that the DTI issued an order before prohibiting this so I researched a bit (online) to see if I could get a copy (and try to understand) its provisions for consumer protection.

I stumbled upon this website, and I suppose the only line about installment offers can be found in Section 3, to wit -

"3. When the retailer offers the consumer an option to pay in cash, card or on installment, the same is allowed provided the payment options shall be disclosed by way of a separate information to the consumer but not in the price tag."

Upon further skimming of Administrative Order No 10 Series of 2006, I suppose the order centers more on how the price tag is used, rather than to restrictions on surcharges.

While Section 5 states that retailers are not allowed surcharging, it perhaps refers to cash price = card price; but not cash price = installment price.

Anyhow...

Obviously, when you will pay on terms, I suppose the rate is going to be different. If this is the case, then cash is truly king. Except for those cases, the credit card will be more advantageous.

For one, you don't have to bring a wad of cash in your wallet.

While government officials say that "Manila is safe", I've heard numerous urban legends (or true stories, I suppose) of thieves just across Manila City Hall, i.e. the Lagusnilad underpass. A friend of mine was riding a jeep and the friend including all the other passengers, got held up near historic (past and recent) Luneta.

Crime rate is a statistic that's based on reported cases. So if a victim does not report a criminal activity, then obviously, we're looking at some distorted statistics.

I digress.

This being the case, having a credit card is not only more convenient, it's safer. Provided, it's not stolen. For other tips on safe use of credit card just hop on to this page of the Credit Card Assoc of the Philippines.

Depending on your credit limit, you are carrying an amount of money that's no larger than the palm of your hand and no thicker than your finger nail.

Another advantage of using a credit card is the usage points you get with every swipe of your card. Usage points can be converted to premium items or flyer miles, saving you money from spending on a gadget/item or taking a flight.

Then there are promotional offers. Credit cards can have tie ups with restaurants, boutique shops, hotels, spas, etc. With cash, hmmm....

Lately, the major credit card companies / banks have been vying for a piece of consumers' wallets with intriguing sets of freebies depending on the amount you spend. If I remember right, the pioneer was BPI, with its tie up with Jollibee. (I wonder who's the genius who thought of this promotional offer).

Then there was Red Ribbon, Greenwich, Pizza Hut, Starbucks, Time Zone, Free Movies, and lately, McDonald's. On a side note, which do you think was the most effective offer?

The free meals were surely a hit, and so were the coffee and movie. Consumers even go to the length of breaking their purchase receipts to get more freebies. For example, if the card company states that a minimum 2,500 gets you a meal, and the purchase bill is at 7,000, you're going to see 3 receipts, 2,500 + 2,500 + 2,000. Instant two meals!

With cash, hmmm....

Of course, the only problem with credit cards is that at times you get deluded into thinking you have lots of money.

To be continued in the next post....

Outlast... Atlas

2010-08-27T14:24:00.000-07:00

Don't try to decipher the title. There's no meaning attached to it.

After saying don't touch Philex, it seems to have bucked its trend, at least temporarily. Volume was quite strong, looking at the chart. It's been going down for almost a year already, with intermittent bear rallies that salvage its share price. I suppose that at 9.25, it had gotten to a more tolerable PE ratio (I don't have it, but I suppose the share price is now closer to it).

So time to buy? Perhaps as a trading buy, yes. I can't point my finger and say, "Oh, PX is going back to 20."

Atlas Mining on the other hand, fell through the 11.00 roof. Tsk tsk.

As a trader, I'm frustrated with how Atlas performed this week.

If for long term holding, the stock should be a good one to hold, of course with one caveat - that they continue to earn money. That's why I said that Atlas should still be considered a speculative buy for the investor. When I said investor, it was someone who took a long term view.

Readers of my blog would know that I differentiate a trader from an investor. Trading is short term; investing is long term.

Trading Atlas?

Given my crude chart courtesy of PSE's website, support for Atlas is at 10.50. I think there may be some trading opportunities for it, so that should be a good entry price next week. The selling pressure should ease and hopefully, the buyers will regain their momentum.

If the PSE wants to attract more traders and investors, they should improve their charting program. I'm sure there are people out there who'd appreciate that.

One of the tools I always look at is the buy up vs. sell down volume. While this is taxing as you have to monitor it daily, it gives you a good grasp of the momentum of the stock. More sellers may mean bearishness, profit taking, etc. I don't buy when there's too many sellers because it means a lack of faith in the stock.

If the stock is continuously being bought up, then by all means join the party!

This style is only applicable to traders who tape read. If you have a day job and can't do that, then at least have a reliable stock broker who can do it for you. Usually, this can happen if your stock broker is also a trader. I'm sure he or she uses this tool too.

News also came out recently about the increased mining output of the Phils. This is certainly good news for the industry. I believe that this is an industry that can provide new avenues for economic growth.

Until the next post!

At last, Atlas!

2010-08-20T19:46:00.000-07:00

Dear readers, so sorry for not having been able to post anything for quite some time. I've been stumped at work and just couldn't find time to update my blog. The title of this entry, "At last.." is a sigh of relief that now I'm able to update this blog again.

At last also refers to a recent mining stock that flew, unlike other basura mining stocks which overpromise and underdeliver. Since I love pun, I suppose "At last" was a good word play for Atlas Mining, which in the previous two weeks broke out from its consolidation phase in the 9.6 range to reach a high of 12.20, if I'm looking at the chart of Atlas (Ticker AT) of PSE correctly.

However, the run-up has died down a bit and it's just at 11.12. Running out of breath?

Without over-analyzing the chart, I think a little bit of logic is in order. Atlas Mining had been consolidating, meaning, trading within a range with seemingly no direction, for close two to four months already. Given this, there are people who, in trading parlance are called "weak hands", sell at the first sign of trading profits.

Other than the weak hands, I think there's a need to also coin a new term, "tired hands", which to me means and refers to people who got tired of holding a stuck (as opposed to a stock) and letting go even if the trading profit is downright absurd.

I think that Atlas Mining still has legs to go. They actually reported some good numbers for the first half of this year. Atlas probably won't be covered by the more prominent stock brokerage houses as these would probably go for big names like the Ayalas and Aboitizes of the world. From their press release,

"Atlas Consolidated Mining and Development Corporation (Atlas) is pleased to report a
P460 million net income for the first half of 2010. This result shows significant progress
given the P1,169 million loss incurred at the end of the last fiscal year. The second
quarter net income is also nearly triple the first quarter income of P164 million"

Atlas should be still be treated as a speculative stock with huge growth potential for a risk-appreciative investor's portfolio. However, the entry price can be tricky. At this point, the stock price is well off of its high. Personally, I hope the stock does not fall through the roof of 11.00. If it falls down, then in my belief, the stock has reversed its trend already, and you can buy cheaper, but not necessarily right away. You will have to wait it out. Why?

This week's daily chart looks nasty and next week should be a good proving ground for this, going up? or going down? I don't know. I just hope that the cliche,"history repeats itself" does not hold true. I'm pointing to the fact that late last year, it broke away from a range, zipped to 12, then crashed back to earth. If history repeats itself, then Atlas will go through yet another consolidation phase. Maybe you'd have an early Christmas if you buy Atlas in the 4th quarter. If you're a trader, then wait-and-see would be better.

I'm not flat out recommending this stock as it can just become a stuck again as company performance wise, they have to show more consistency. At least, there's a good story to go around, from a net loss, they're swinging into profit again.

This is unlike another listed mining company, Philex. Philex is a good company but a bad stock to trade. The stock just seems to be dying a slow death in terms of share price. So don't touch it.

I've learned my lessons with most mining and basura stocks. With the stock market going up and up, you're better off trading quality stocks than buying the basuras. I suppose that's why most of the money now are in the second liners like Metro Pacific, Megaworld, etc. However, with the new administration, I hope that the government can work with both the mining companies and the local government so that a mining renaissance can happen here.

After all, the country can't purely rely on BPOs as the growth engine for its economy. Medical tourism and mining should be growth areas in the next 6-12 months.

P.S. I'm glad I recommended Metro Pacific, which to me, is a stock you can hold until you grow old. Again, provided the management team is always competent. I look at Metro Pacific as a stock you buy because of the company and its potential. As most investors say, "buy the company, not the stock." When I recommended it, it was not based on studying their FS nor its chart. It was purely out of common sense. (MPI also has interests in FOUR hospitals)

Sometimes people get lost in the "fundamental analysis" or "technical analysis" of a stock that they forget common sense. Of course, it's also a matter of asking yourself, how long will you hold the stock for?

As we speak, Metro Pacific has a TV commercial in CNBC (or was it Bloomberg? or both?). So watch out as the company draws interest from big foreign brokerage houses. A company with that much marketing muscle presupposes a lot of room for growth in the company's performance.

So until my next post, appreciate the risk, then appreciate the capital!

New Trading System, Old Tricks

2010-08-04T07:17:00.000-07:00

Hi folks, apologies that I was not able to post anything last week. I was inundated with work and other things last week. Nonetheless, I tried my best to observe how the new system works so much that I forgot to buy WEB.

WEB.. that stock that was sold continuously for days or weeks and I always told myself, "I'll buy this soon." Suddenly it had a life of its own and from about 12.25 last week flew to 16.50 this week, more or less. I just sat, watched, and woefully, did nothing. 30% in just one week, beats the hell out of an 8-5 job right?

After some early personal skepticism, I realize now that you can still make money even with the new system. By system I mean the new board lots. System could be the program a broker is using. I'm not a broker. But I could be one soon, if I don't have any savings, hehe.

Stocks that had no fundamentals (I suppose), i.e. basura stocks were also active. One that caught my eye was SLI. Even with the new board lots, I'm sure that day traders still managed to rake in good profits. I just wonder about the accuracy of the charts. Perhaps this time around, instead of looking at the chart, just looking at the ticker would do the trick.

One thing about the new system was the very lackluster trading on its first day last July 26. The turnover was terrible, not that I traded anything. So far, it seems that the 1 centavo fluctuation (changes depending on the price of the stock) hasn't turned off that many traders. That's definitely a good thing.

I'm also happy and equally surprised that our index is now at 3,500. If there's follow through buying tomorrow, then I suppose this bull run still has four legs to go. If there's a correction, well, that's nothing to worry about. My technical analysis alma mater, Absolute Traders, has this absolutely interesting chart analysis.

I suppose what was said in the Money Talks seminar that a new President brings with him/her a strong stock market performance is holding true. History repeats itself. With Pres. Ramos, Pres. Estrada, Pres. Arroyo, and now P. Noy.

So, as I always say, appreciate the risk first, then appreciate that capital of yours!

The New Trading Rules of the PSE

2010-07-22T06:42:00.000-07:00

On July 26, Monday, a new trading system takes over the PSE. I was still a baby (or probably still being made) when the existing system was already in place so I don't have any reactions - positive or negative - towards the new system. All I know is that there is silent (?) dissent from some brokers and traders about the new system due to its impact on day traders and traders in general.

The new trading rules are available at the PSE. Of course, reading through the report will test a bit of your patience if you're not someone who likes to go through all the details. Personally, what I found interesting and quite important is the change in the fluctuation table. Specifically, the board lot used to look like this -

PRICE	MINIMUM FLUCTUATIONS	BOARD LOT
0.001 to 0.0024	0.0002	1,000,000
0.0026 to 0.0050	0.0002	1,000,000
0.0055 to 0.0100	0.0005	1,000,000
0.0110 to 0.0250	0.001	100,000
0.0260 to 0.0500	0.001	100,000
0.0525 to 0.1000	0.0025	100,000
0.105 to 0.2500	0.005	10,000
0.2600 to 0.5000	0.01	10,000
0.5100 to 1.000	0.01	10,000
1.020 to 2.500	0.02	1,000
2.550 to 5.000	0.05	1,000 **
5.10 to 10.00	0.10	1,000 *
10.25 to 25.00	0.25	100
25.50 to 50.00	0.50	100
50.50 to 100.00	0.50	100
101.00 to 250.00	1.00	10
252.50 to 500.00	2.50	10
505.00 and up	5.00	10

By Monday, the board lot will look like this -

Notwithstanding the obvious difference in graphic layout, you will notice that the price fluctuations are a lot lot smaller now. For example, before, a stock with a price of 20 pesos would change every 25 centavos, such that a typical stock posting would look like this -

Bid Ask
10,000 20.00 20.25 5,000

Now, with the new system, a stock with a price of 20 pesos would look like this -

Bid Ask
10,000 20.00 20.05 5,000

What's the relevance?

Well, from an amateur stock trader's standpoint, depending on your broker, you already have a small profit with just ONE fluctuation if you were trading under the old system.

Now, assuming it's the same stock, you'd have to wait FIVE fluctuations just to get to the price of 20.25 for a profit with the new system. Further adding to the "difficulty" in making a buck is that there will be trading price limits based on what they call the Dynamic Price Threshold.

If I understand correctly, a stock will be frozen (i.e. temporary trading halt) once it hits its lower or upper Dynamic Price Threshold. Based on the information I got from Citiseconline.com -

The Dynamic Price Threshold** is computed as follows:

- Dynamic price threshold (upper) = last traded price + (last traded price multiplied by the dynamic tick)

- Dynamic price threshold (lower) = last traded price - (last traded price multiplied by the dynamic tick)

Example:

If the last traded price for stock A is 5.00 pesos and it has a PSE defined dynamic tick of 0.05 then:

- Stock A dynamic price threshold (upper) = 5.00 + (5.00 x 0.05) = 5.25

- Stock A dynamic price threshold (lower) = 5.00 - (5.00 x 0.05) = 4.75

I don't know why it's called a dynamic tick or if there's any connection to the dynamic duo, but this would make trading a bit, well, harder.

Without going further into the other details of the new trading system, this is the big question - Will the PSEi resume its uptrend come next week? The timing, at least to me, is off-putting. The ghost month is just over the horizon and based on my limited trading experience, is one of the bear months of the local market. It usually lasts until October before mounting what is known as a Santa's rally.

More importantly, will chart reading still be useful? I mean the price ranges now are different from the ones before. Will the prices of before be of any relevance to its future price action?

All these questions will be answered in the next few months, as old traders find ways to do new tricks and new traders probably adopting a wait-and-see mode.

I suppose given this, the market will most probably move sideways. I am not sure since I'm no fortune teller. Well, nobody said change was easy. I just hope that this is for the good and the new system would increase liquidity and volume of the market. If you think about it, volume would certainly pick up since based on my example, a trader will have to buy five fluctuations of a stock just to get to his profit target price.

Let's hope for the best.

Guerilla Investing, 5000. PSE, 3400.

2010-07-17T17:11:00.000-07:00

(Having the two numbers interchanged would also be fine by me hahaha)

Welcome to a fresh new Guerilla Investing!

I hope this more streamlined look and well arranged labels will help my readers sift through the glut of posts I've made since the start of this blog.

I was heartened by a blog milestone - 5000 visitors since I started blogging. Regardless if it's 5000 unique visitors or not, I hope in my own little way I was able to impart some knowledge on your road to financial independence.

Coupled with my personal bullishness on my blog is the bullishness of expectations of the new administration. To quote the news piece -

"According to ING’s quarterly Investor Dashboard Survey, the country experienced an 18-percentage-point increase in investor sentiment to 157 in the second quarter of 2010 from 139 in the first quarter."

Well recently, our stock market hit a new high breaking the 3,400 level after four tries to hit this level if I'm not mistaken. Given this, I would think that from an amateur technical analyst's understanding, we are going to hit high notes by the end of the year. This is not to say that the road ahead is full of roses.

Against this backdrop is that the BSP is keeping interest rates at lows due to uncertainties as well as the manageable inflation rate. This means that credit is cheap and it should help businesses expand. When businesses expand, then it can create jobs and potentially enjoy higher revenues. Bodes well for the stock market. This also bodes well for the fixed income market (bonds) because interest rate is the same.

Of course, contrarian thinkers will always say that this may have already been "priced in". If you don't already know, stock prices are always ahead of actual performance. This means that the price may have rose already with the anticipation of a news, a new project, a new high in revenues, etc. such that when the announcement is made to the press, the stock price doesn't move anymore.

In fact, from personal experience, it shows that - at least locally - when profits are announced, stock prices suddenly drop. This is why there's this oft quoted cliche, "Buy the rumor, sell the news".

So far our stock market has been insulated from what is happening worldwide. The DOW recently fell triple digits (again) so I wonder if we'll keep on being insulated by next week.

But the following data should give us confidence the the Philippine economy is still above water.

Remittances reached record level of $1.58B in May

In this article, noteworthy is this fact -

"The main sources of remittances in May were the United States, Canada, Saudi Arabia, Japan, the United Kingdom, Singapore, UAE and Italy. Combined inflows from these countries accounted for 81.5 percent of total for the five months to May."

With the continued influx of remittances and strong consumer confidence -

Auto sales jump 37% in 1st half of 2010

Salient points -

Commercial vehicle sales went up 39.8% over the past six months comparative period while passenger sales went up 32.2%. This to me is good news because it means both businesses and consumers are spending.

In an old post, I've said that key indicators for the lay investor include OFW remittances and car sales. Screen out the rosy news you read and focus on these hard numbers. If the stock market doesn't perform at par with these indicators, it could be a chance for you to buy stocks at their lows.

However, now that the index is at 3,400, I anticipate the market to move sideways. It can go higher but I'd rather it going sideways so there's a strong base at 3,400 before we continue hiking. Most of the blue chips have risen so it could be the second liner's chance to shine. Most of the second liner stocks are those not part of the PSE index that have recorded blowout revenues.

Notwithstanding all these positive news of late, the trouble with the local economy is the anticipated huge budget deficit. Investors both foreign and local will be looking to P Noy's first SONA with high hopes. Wang wangs are symbolic but we also need strong economic programs that promote investor confidence and generate jobs.

I Talk "Money Talks" (Part Three)

2010-07-07T06:45:00.000-07:00

It's been a week since the proclamation of P. Noy and the market is now... well it's moving sideways with no clear direction yet as to whether it continue its flight... or your fright. Last Friday, the US market fell triple digit (if I remember right) just before their July 4 celebrations.

For quite some time now, the Philippine stock market has actually lived up to the decoupling theory. No, decoupling is not related to making babies.

My humble layman interpretation is that it means that the Philippine market is somewhat insulated from whatever happens to the US market. That is, if the US market goes down, we won't. If we do, it's not going to be as bad.

That's been the case, but perhaps because the proclamation was over and the market touched a 2-year high, it was reason for it to correct and "build a base" or support. If I read analysts correctly (in the news or forums), the Philippine market is still in an uptrend channel and it's just taking a breather now.

Time to go in? I don't know. Even Nostradamus cannot tell you if he were alive today. If you are investing, then anytime is a good time since you're investing your money and not touching it until you hit retirement or when your emergency fund is depleted.

With that said, let me list down for your benefit the stocks recommended in the previously concluded Money Talks.

Investor's caveat: Investment entails risks and you should be aware that returns and your capital are not guaranteed.

The stocks were selected by First Asset Metro based on their PE Ratio. An elaborate definition on PE Ratio can be found here. But for your benefit, it's one possible tool for an investor to use prior to investing in a particular company. However, it should not be your only basis for investing in one.

As Investopedia states, "it would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects."

Now, having said that, please also note that the P/E ratio is a mathematical formula which translates as -

The market value per share is the current stock price while earnings per share is computed

More or less, EPS is static depending on your time frame. The market value though is what's erratic.

So what's the relevance Mr. Guerilla Investing Blog? Well, my dear investor, if the stock price has increased, then simple math tells us that the PE ratio will increase. When a stock has a high PE ratio, it may mean that the stock has become "expensive" relatively to other stocks in the same industry.

At the time of the presentation, the stocks may have been trading at a particular PE Ratio. So since the market prices of the stocks indicated have changed already, then I don't see the point of having to list down the respective PE ratios of the stocks listed.

Confused about the multitude of terms? Anyways, I was also confused when I started reading up all the terms available in Finance 101. I learned the hard way - through reading and personal experience. But it's an investment in time that's well worth it.

So here goes the list (Based on ticker symbols) -

MBT
DMCI
AP
AEV
FGEN
PNB
EDC
SCC
AGI

Please note that just because the above are stock picks, it means that if you buy today, you gain tomorrow. The gains can happen in a matter of days, weeks, months, or even years. Further, since stock prices have fluctuations, then there can be instances where the market price will fall below your purchase price.

But it's specifically that sort of caveat given that makes you sleep soundly at night. If somebody is presenting a "financial" product to you with guaranteed returns higher than banks, then be wary. It could be a scam.

Whew, that was a lengthy post! I hope you learned something. Happy investing!

I Talk "Money Talks" (Part Two)

2010-06-30T04:47:00.000-07:00

Prior to today's inauguration of the 15th President of the Philippines, the stock market hit a 2-year high at 3,374. The index had been testing the resistance of 3,365 for some time now and if you want further analysis, check out this index TA by Absolute Traders. Bright prospects remain for the local index. In fact, the local stock market has not been moving in sync with the US market and that's a good thing.

But, how our market will withstand the triple digit drop of the DOW (below 10,000) the other night remains to be seen. With the weak June jobs data in the US, I'm doubtful the US markets will recover from Tuesday's fall. The resilience of the Philippine market will surely be tested tomorrow.

The new President's speech was laden with the usual big promises like fighting poverty, tackling corruption, and us becoming an investor friendly nation. While I hope the President can deliver on all three, the last one is something I hope he can really achieve. The Philippines has been the cellar dweller in Asia as investors poured money into China, Vietnam, and even Thailand. I'm quite optimistic that we have more to offer given our English language advantage.

Being a lover of words, I also loved the coining of the word P. Noy, a word play on the term for the Filipino everyman and President Noynoy. Amazing.

Then, there was the part on the wangwang and counterflow in the President's speech. I think that struck a chord in a lot of people and I hope he takes up that promise. I long for the day when PUV's follow simple traffic rules. If you want to see how brazen they are, just go to the corner of Recto and J Abad Santos Streets. The entire Recto acts like a jeepney terminal.

I'm making all these Presidential talk because in the Money Talks forum, it was said that the local stock market rose in each of the first year of a new Administration. Against this backdrop are healthy profits from local corporations. This should continue to provide impetus for the market.

Apart from this, it was also mentioned that local money is the one leading the rally in the local market. I've been harboring that idea and I think I blogged about it in one of my older posts (I will have to look through them though). This means Filipinos are looking beyond savings deposits, time deposits, and real estate as means to realize their financial dreams.

And, that to me is a very good thing.

P.S. Stock picks from Money Talks to be featured in my next post. See you there!

I Talk "Money Talks" (Part One)

2010-06-24T04:56:00.000-07:00

As promised in my last blog post, I'll share some of the insights and even some stock picks from the Money Talks seminar I attended recently. The seminar was held last June 11 at the PSBank Tower along Paseo in Makati.

Overall, it was a good session.

I understand that First Metro Asset has a partnership with UA&P and that's why Dr Vic Abola was present to discuss the Philippine economy as well as the adverse impact (if any) of the Greek/European debt crisis. There was then a presentation of the outlook of the Philippine Stock Market, stock picks, mutual fund investing 101, and how to trade stocks online via First Metro.

In a nutshell, it's good to be in Asia.

On a personal note though, that's the great paradox for the Philippines. The West seems to be on the decline mounting huge debts while Asia is rising. Yet locally, a lot of Filipinos still yearn to Go West. Oh well. That's a challenge for the new Philippine President.

The Philippine economy is expected to weather the external problems. Low interest rates are favorable for business expansion. Low inflation rate will mean that the BSP maintains the low interest rates. Construction is still picking up both in the public and private sector.

SMDC is supposed to build 100,000 UNITS per year. Before SMDC, the entire real estate industry generates about 250,000 a year.

Imagine the glut in the coming years assuming the buyers of these units are looking forward to rent units out rather to live in it. Location and project development will be key to long term appreciation of property prices. This is my personal opinion of course.

Consumer spending is also alive in the country. Proof positive is that (if memory serves me right), car sales and ad spend are up. The almost weekly sale in SM is probably another key driver.

Another interesting data I got was that East Asia accounts for 42% of Philippine exports. Europe? Just 18%. The US continues to be our #1 export destination.

One more trivia - China is going bananas over Philippine bananas as we supply 60% of their requirements.

A side effect of the debt crisis and US recession was that gas prices did not go up since the demand for it slacked. This bodes well for the Phils. since we import our requirements. Low gas prices mean lower inflation. Projected inflation for this year (vs the previous year) is 4.5%

Challenges for the Philippine economy remain to be the power crisis (yes we have one) in the South, the growing government deficit, the peso appreciation (OFW remittances lose value), among others.

That's it for now. That's probably info overload already for you. More in the next post!

I'm Back!

2010-06-17T19:53:00.001-07:00

Hello dear reader. It's been quite sometime since I blogged. My computer crashed so I had no means to update this here blog. Now that it's back and running, I can go back to my blogging ways.

It's been a long month for the local stock market since I last posted. As far as I could recall, the only exciting trade between the time I last posted and today was ORE. Some blue chips also traded higher as the index is already at 3335 today's close, a few points off from the June 4 high of 3,355.

This week, one stock that traded well was NRCP, for what reason I don't know. I was able to trade the stock but made only a few bucks because I exited at the wrong price. My tools were just the crude PSE chart and calling up the broker every so often.

Recently I attended "Money Talks", an open forum and seminar from First Metro Asset Management. They had a very interesting discussion about the effects of the European debt crisis, the Philippine outlook, and of course, the local stock market.

I'll post more about it in my next post as I have to run. This post was written to tell you dear readers that I'm still here. :D

Directionless Market

2010-05-19T06:31:00.000-07:00

Thanks for dropping by reader. I wasn't able to post anything last week, not that it mattered since there wasn't anything exciting to see in the market. There was a brief rally after Europe announced its rescue package but markets the world over has been on the way down since.

I expect the market to head with no direction. And lesson and experience tells me that when the market has no direction, it's better to stay out. Somehow, the saying that "sell in May and go away" is holding true thus far.

Putting the perspective of the US' bailout of its failing financial system in 2008, markets rallied for a while then just went south. It took quite a while before stock markets - and economies - rose again. Given the US bailout the time frame was close to 6 months, if memory serves me right.

But now, we're not talking about bailing out banks. We're talking about bailing out countries! So.... I shudder at the thought.

I got to wonder really. Banks mismanage money. Governments mismanage it too. So if that's the case, will it be better to just put your money in a stash? You can trade the stock market on your own, cash in the gains and always hold on to cash.

While this may sound enticing at some points, it somehow borders on paranoia. Time and time again, investing for the long term has been a boon for investors. I can't say yet if that's applicable in the Philippine setting as I haven't done that. Perhaps if I'm able to have enough to invest for the long haul, I can tell you in about 5-10 years hahaha. Right now, I'd rather be a trader than an investor.

The Philippines though, could be a bit insulated, sans foreign brokers dumping our stocks, given our relatively clean and peaceful national elections. I checked today's PSEi close, and we're now at 3,222. We're 100 points shy from the low last last week of 3,142. More pain to come.

It's inevitable, stock prices may have risen ahead of themselves (i.e. ahead of their projected earnings). While there is a crisis on going, this can serve as an opportunity for stock market newbies to enter at "cheaper" prices. Of course, this is a double edged sword. The path downwards could be continuous.

But, there's really a dearth of possible investment opportunities for the Filipino investor. Time deposit? Interest rate is too low. You're better off spending your money and enjoying your life. Mutual funds and UITF's? If you pick the equity fund they're investing in the same place - the local stock market. Except of course if you choose bond funds. Historically, when the stock markets are crashing, bond markets are cashing gains for investors. This is referred to as "flight to quality". Of course, this is just a simplistic definition.

Making money today is more difficult than it was a 20 years ago. Most industries have heavily entrenched players already. Margins are smaller given the stiff competition. So if you are afraid of shelling out money to be an entrepreneur, then there's a slower way to growth - investing for the long term.

The bloodbath in the markets can spell good opportunities for you. This is a pure speculation play but I would advise going to quality real estate stocks like SMPH, RLC, and ALI. The REIT is supposed to be passed into law sometime this year. With this, there'd be gains for these three big real estate companies. I suppose SMPH and RLC are the ones who stand to gain the most due to their massive square meters (or hectares? hehe) of leasing space.

Of course, if you will invest just for the speculation, then expect that the price can go both ways - up ... or down. Don't say I didn't warn you. Currently, I don't hold any of these stocks but I'm actively looking at them as opportunities.

Until my next post, stay safe with your cash :D (as of this writing the DOW JONES is down 70 points, and more bad news - mortgage delinquencies and new foreclosures increase)

Greece is the Word

2010-05-08T18:54:00.001-07:00

Last week, we mentioned that there may be a possible downside risk to the market, who would've known that it would be this bad? We projected a support of somewhere at 3,200, unfortunately, the market settled at 3,142 last Friday. When I was talking to my broker, he told me that the index support was actually at 3,150 and not 3,200. Maybe it's due to the chart I'm using that's why I can't see clearly, or, it's just that my TA is rusty already.

Whatever the support is, Friday's close broke through 3,200 and 3,150.

While Friday was another depressing day, there were many trading opportunities - RLC, SMPH, AP and EDC - to name a few. Yes, while the market was dreary, these stocks offered (brave) traders opportunities to make money. In fact, AP closed higher than Thursday's closing price. EDC and AP's performance just shows that this year, power generation companies have much upside. Last year, the darling stock (which I missed #@$#) was Philex mining as it generated about 50-100% in return based on stock price. AP is this year's stock, which I also missed.

Perhaps I was too much concentrated on looking for stocks to trade that I forgot about investing for the long term, i.e. investing in quality stocks even if their price actions are not exciting. That's assuming I had the money to invest hehe. Sometimes it gets frustrating so just putting money in a mutual fund would be a better option. You don't have to spot the stocks and just rely on your investment fund manager. Anyway...

What caused the wild volatility this week? One word: Greece. There is a risk of a crisis contagion in the European Union.

Personally, I don't understand what's going on/wrong in Greece, just that I know they have a problem with their economy. I scoured the net for some information and stumbled upon BBC. They have a very lucid explanation. I think this part of their explanation sums it all up -

"For years, Greece has been spending money it doesn't have.

The government there took advantage of the economic good-times to borrow money and spend it on pay-rises for public workers and projects such as the 2004 Olympics.

It began to run-up a bigger and bigger deficit (the gap between how much a country brings-in from tax, and what it spends).

After the world economy went bad, Greece suffererd.

Banks started to view it as a country that might not be able to manage its money.

They worried Greece might eventually fail to pay its loans, and even go bankrupt.

To cover the risk, banks started charging Greece more to borrow cash - making the problem even worse.

Eventually the government there went looking for help."

But if this is a Greek problem, why are other countries affected? In the same BBC link, this explanation should tell you why -

"As well as Greece, banks and credit rating agencies are going through their books looking for other bad risks.

That means countries that have a big budget deficit, compared with how much money their economy generates.

Portugal and Spain are reckoned to be two that could face problems next.

The EU hopes that its bailout will reassure the money markets that their cash is safe.

However, that depends on Greece getting control of the situation and proving it can make the cuts needed.

The UK does not use the Euro currency, but could still be affected.

Its budget deficit is also large, and we could start to appear unattractive to lenders.

UK banks also hold some of the debt of countries such as Greece, Spain, and Portugal.

If they were to go bankrupt, it would mean more problems for Britain's banks."

How can one country hold debt of another country? It's quite similar to the Philippines selling bonds (bonds are a debt issuance) offshore. Did you know that the Philippines is Asia's biggest offshore bond issuer? Same article from ABSCBN states - "The debt-laden economy, which relies heavily on foreign and local borrowings to fund its budget shortfall, faces a budget deficit of P293 billion, or 3.5% of GDP, this year after a record shortfall of P298.5 billion, or 3.9% of GDP, in 2009."

Debt laden huh? I wonder if the Philippines will one day go down the Greek road to economic oblivion. Due to some minor research online, I found out that other European countries with big deficits are - France, Spain, Ireland, and the UK.

This entire drama is quite amusing when you look at it from the point of view of Personal Finance. Why? In personal finance, you are always advised that you should spend within your means. If some governments in the world cannot even practice this basic tenet, then it's no wonder their citizens also run up debt like there's no tomorrow. A lot of countries in the West have this affliction - using credit cards, mortgaging their houses, borrowing money to fund their yearning for affluence.

So what to expect for the Philippine market next week? A lot of it will now depend on domestic issues - obviously it is the elections. It will also depend on the actions that will be taken by EU prior to world markets opening for trading tomorrow.

Since the market has been sold down to 3,142, I'm sure we're almost nearing a selling climax. Unfortunately, since I don't have any data, we don't know if foreign brokers are dumping our stocks. For me, it's not about the charts anymore, but about market sentiment. The DOW fell by almost 1000 points supposedly due to a trader error and so that was a major major drag for this week. The good news? Our market was down by as much as 90 points but closed just down by 25. So perhaps, the market has support in 3,142, thereabouts.

I'm not a fan of economics and I don't think I ever will. Few really do since this isn't the most interesting of topics.

I hope that whoever becomes the next Philippine president has a well equipped brain that understands economics. Everybody is promising us the moon and the stars with no clear platform or agenda. Choose wisely. The country, and the stock market (as it is considered the barometer of the economy), depends on it.

The Beta...max?

2010-05-01T17:17:00.000-07:00

We are just one week away from the national elections and perhaps, that could be a drag for the market due to uncertainties about the automated elections, and of course, anticipation to know who'll be the next President.

If the automated elections push through with little hitches, then on May 11, expect a good market rally (as long as foreign indices, especially the DOW go up too). So this coming week of May 4-7 will likely be a consolidation phase for the market. I tried my rusty knowledge of TA over at Yahoo, since I don't have a charting software. I tried reviewing the chart of the PSEi, or the index of the local market. (If you're a first time stock market trader and would like to know more about TA, go to Absolute Traders)

If my reading is correct, the index will just hover between 2-3% the resistance of 3,300. Certainly a dip back to 3,250 seems likely as the market needs fresh directions. The market may have that big a correction since there's no clear index support except somewhere at 3,200.

While the IMF has raised its forecast for the Philippines, but our deficit shot beyond the target for the first quarter. Earnings of most of the biggest Philippine corporations have been robust so that's quite a number of good news trouncing the bad. The next big story will be the Philippine election and I'm keeping my fingers crossed that all these naysayers about the election not pushing through, blah blah blah will not hold true.

Enough of the elections, there are more sites out there and more personalities who can give you a better opinion. So I digress.

Before you even begin to look at individual stocks, you should look first at the index and its trending. If the overall index is going down, then there's no sense picking individual stocks. These stocks will just be dragged lower by the index. The relationship of a particular stock to the overall index is called the Beta. Of course, don't take my word for it, so go to Investopedia (this is the link) for the exact definition. The higher the beta is of a stock, the more volatile it is. If you're lazy and you don't want to go to the link anymore, here's a quick definition -

A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

This data is not readily available and you need to do regression analysis as Investopedia suggests. Don't ask me how to do it, as I only do regrets analysis. Hehe. In the past, when I was still subscribing to Technistock, the data was ready, albeit not accurate.

But, without going into the actual computation, if you are a regular stock market trader, you will know more or less what stocks have a strong relationship to the market and which don't. I learned about Beta after browsing through a book on stock market investing. I didn't buy the book anymore as stock market books are quite expensive. If I stumble upon one of them in Book Sale, then that may make me decide to open my wallet...or coin purse.

It's always good to look at the bigger picture before you settle on any particular stock. As that cliche often quoted is, you cannot go against the market. So, before you take a plunge, study first. Good things come to those who wait... and study.

P.S. CPM was the biggest gainer last week (ending April 27) and undoubtedly the biggest loser this week (ending April 30). Then again, 3.70 was a strong resistance. I'm just surprised that it went back all the way down to 3.15 (lowest for the day). Just another day for CPM I suppose.

The Great Unwinding?

2010-04-23T07:30:00.000-07:00

Greetings readers! Sorry for not being able to post last week. I think I stayed too long in the office last week and just wanted to enjoy my weekend. Hehe.

In my previous post I mentioned that the blue chips were about to run out of steam and that it will pave the way for the second wave and third wave - the second liners and the basuras will be moving up soon. After my post, the market went up to a new high and then had some pretty big corrections along the way. Proof positive that the blue chips are not the place to be in at this point in the game.

Positive earnings news in the US were doused by the US government hounding Goldman Sachs and the looming default of Greece. Locally, a lot of companies have started publishing their quarterly results as well.

If you are a first time stock investor, I would like to advise you that if you read in the papers that XYZ company booked revenues and / or net income of so and so, DO NOT buy the stocks of XYZ company. You should learn from this stock market cliche - buy the rumor, sell the news. In the US, very good earnings serve as catalysts for propelling stocks higher. Locally though, it's another story.

This is perhaps because local companies are not so generous with their dividends. You see, in the US it follows that when a company reports "blowout earnings", a dividend is not too far away. Since investors anticipate that a particular company would distribute dividends, he/she will buy the stock now, driving and pushing up the stock price.

Locally, dividends aren't that common. The only way most Filipinos earn in the stock market is through stock price appreciation. Some people call it capital appreciation.

That's what I did (buying XYZ company because I was impressed by the earnings) when I started investing in stocks about 6 years or so back. I do not want you to do the same mistake I did. Of course, this should form part of your decision to buy the stocks of XYZ, but not right after earnings have been reported. The price will most often decline from its high.

When it's settled at a comfortable support price level, then you can start accumulating.

Let's try to acid test my hypothesis last week that you shouldn't be in blue chips. The following are their closing prices. Prices were sourced through PSE website.

April 8 April 23
ALI 13.75 13.75
AC 347.50 347.50
SMPH 9.70 10.00
TEL 2490 2445
GLO 1015 970
SM 392.50 397.50
BDO 43.50 41.50
MBT 50.50 50.50
BPI 45.50 45.50

The property stocks may have been buoyed by the prospects of the launching of the REIT product later in the year. Filipinos will then gain access again to a new investment vehicle. This is certainly good news because now, we have another avenue to multiply our wealth.

This data table of course does not mean that there were no trading opportunities in between. During the correction for example, ALI fell to 13 in April 20 and 13.25 April 21. So technically speaking, you could still have earned money if you were able to sell today.

Of course, there's that downside risk so why would you buy during the week of April 8? Sometimes there's a thin line between taking risks and being foolish.

The darling of the traders this week would have probably been CPM and ORE. CPM went from 3.25 last week to 3.65 this week. ORE on the other hand went from 1.56 last week to 1.90 at the close of today. Amazing huh? Yes, but it could go both ways, that is why I never want to make a recommendation for these sort of stocks. They're far too risky for the newbie traders.

At this point, the money will most likely be in the basura stocks. VLL today was a good daytrade so for those who grit their teeth today, they were rewarded handsomely. I didn't join the fray though so congratulations to those who did! Opportunities like this do not come so very often.

I still think that the market will correct soon, if not next week, then the week after next. The key thing to remember is - Don't give in to greed!

Trading with Caution Next Week

2010-04-08T08:30:00.000-07:00

It's another long weekend this week coming from the Holy Week-end. For out of town trippers who took their long vacation last week, they should be rejoicing because soon, domestic travel will hurt their pockets due to the imposition of VAT. If Singapore is a fine city, then the Philippines is a taxing place to live in.

So if this is the case, then this will put a crimp on MPI, although not directly. I am recommending MPI as a long term buy but of course this is just my opinion. You should consult your own financial advisor. Investments have risks, whether you invest directly in a stock, or through mutual funds.

Recently, the stock market rose to a new high due to the increasingly bullish outlook... and supposedly an improving economy. The latter is hard to say but the DOW is going up so that could have been the inspiration for our stock market's recent incredible run. I'd still recommend taking a wait and see approach to buying any stocks at the moment for trading.

The blue chips having run up so much means that the first wave is almost over. The second wave and third wave is upon us so that means a lot of the basuras will be moving, along with the second liners. I don't know exactly what stocks can be considered second liners but I think these are stocks that don't have large capitalizations like the blue chip stocks like Ayala Corp, Ayala Land, SM Prime, etc.

In short, if you want to trade the local stock market, then you shouldn't be buying blue chips. Most blue chips are included in the PHISIX (index), so these are the stocks you will be staying away from in the near term.

If you plan to invest in an equity/stock mutual fund; then, now isn't the time to invest if you want to "time" your placement. Wait for a while further before you plunk down your money. Of course, this does not mean that you will be able to time it perfectly. In fact, it's better if you just invest and not think about whether if it's high or low as long as you utilize peso cost averaging.

If you are the type of person who has an account with a broker; then, if you want to earn a quick buck then look for basura stocks on the move. I don't give any hints on basura stocks because these are highly volatile stocks and you might have a heart attack just looking at the movement of their prices.

I think that the coming week will be a consolidation mode for the index or worse, a correction phase. If the index continues to go up, then there's the risk of "overheating" and thus set our market up for an even bigger correction. Tread (trade) with caution.

Resurrecting Your Finances

2010-04-01T04:06:00.000-07:00

It's good to be able to blog again.

Two weeks ago today I was on a plane to Davao and spent the rest of the week there. Then the week after that, I was catching up on the work hours I lost while in Davao. It's just now, over the long Holy Weekend, that I'm able to relax and hammer away at my keyboard again.

While in the plane en route to Davao, my mind was fixated on the news about Cebu Pac's IPO this coming May. It's been a while since there's been any IPO in the local stock market. I can't remember how the following got listed - CPM and E-Games - but I know they were not IPOs. Their prices went up after their listing, albeit for a few days.

E-Games in particular also benefited its sister stock - IP (ticker for IPVG Corporation) - the stock rose...and died after about three days.

With Cebu Pac, JGS (ticker for JG Summit) also rose, and is now dead, more or less. Dead meaning the price isn't moving. Perhaps when the IPO date nears, JGS will have price activity once again.

In any case, the IPO of Cebu Pac would hopefully create excitement in the market... next to the post election rally.

Speaking of the market, it has been rising... but the volume hasn't, so it's best to adopt a wait and see approach. Volume is a very important indicator, pointing you towards the right direction when you are trying to time the market. Of course, Warren Buffett will tell you that you can never time the market. Actually, you can, to a certain extent, with the help of technical analysis. You can also time your entry to a particular stock.

I learned about technical analysis from Absolute Traders. They recently had an event which unfortunately, I wasn't able to attend. If you are an active stock trader or you plan to be, it's good to attend their seminars.

Technical analysis isn't a fool proof system and it depends on personal discipline. Unfortunately, most people do not have trading discipline, i.e. we make decisions to buy a particular stock based on fear or greed. If you can make decisions mechanically, then it's good to trade. Otherwise, you're better off buying a quality stock and holding to it until the day you need your money.

Or, you might want to look at investing via mutual funds. Let the professional money managers select the stocks for you. Do note that I use the term "investing" and not trading. Investing is a continuing approach, i.e. you put money into something continuously with the aim of withdrawing those funds only when you are about to retire, or, if the money was meant for a bigger investment (usually real estate) or a future expense (wedding, child's education, hospital expenses, etc).

If you invested in stocks or stock mutual funds in 2007 or 2008 and invested only one time, then your money has (thankfully) recovered most of its value. But that's the wrong way of investing. In fact it's not investing.

Real investing is doing it consistently, usually monthly, using a portion of your monthly paycheck as investment fund. Then, whether it's a stock, or a mutual fund, you invest monthly in the same security. By doing this, you are doing peso cost averaging, so you are able to average out the buying values, whether it's in the highs or in the lows.

With peso cost averaging, you are able to "resurrect" your money over the long term because even if you bought at times of market highs or peak prices, you'll also have times where you buy at the lows. Volatility can be a friend.

I don't confess to be a money expert. I'm still learning along the way, reading books, watching news, and learning from others. Money is easily spent but not so easily earned. So if you are not aware of what you are getting yourself into, whether it is in bonds, stocks, real estate, insurance, or what not, it's best to just go via the safer way of investing - buy and hold and diversifying the kinds of investments you get yourself into.

Childhood Allowance: Inflation Gauge

2010-03-13T06:37:00.001-08:00

Economics, along with Chemistry, Physics, and other Science and Math subjects are one of the most sought after subjects in the country if you want to have a fit of headache or want to sleep in class.

I've only met a few people in my life who can honestly and sincerely say that they rather enjoyed these classes. I've met fewer teachers who made these subjects interesting. Most of them just talked to the blackboard and lifted materials from the textbook.

Thankfully, there's the Internet and there are loads of books that explain these topics more interestingly. Perhaps not listening to your teacher gave birth to the book industry's "guide for dummies" series of books. Watching CNBC and Bloomberg also helps. So it's not entirely true that the television is an idiot box.

Recently, I had my hair cut and I was given a kiddie magazine to read. I suppose it was randomly given to me and it did not mean anything. In a short article contained in the magazine, there was a topic on the amount of allowance kids these days get, compared to what their parents were getting in the past.

That got me thinking.

Kids these days supposedly get about 150-250 a day. It sounds a lot to someone (like me) who received between 50-100 during my time. My parents had even "less", and most of the times, none, during their younger days.

At 250 a day, that's about 5,000 in a month. Even if we use 150, that translates to 3,000 a month. So assuming you have a child that's in high school already and your salary is about 25,000 - 30,000 (gross) a month, I'm amazed we Filipinos are still able to survive. Imagine, you still have to pay the tuition, your rent, utilities, etc. Frankly, I'm surprised some even have anything left to invest with.

If you don't read (or ignore) business news and skip on important data like inflation, just look at the allowance example. Your 50 pesos then is worth a third today (if your allowance is 150). Therefore, put another way, what you could buy for 50 pesos then, you have to pay 3x more today. Of course, this is just a simple straight computation. You can still purchase decent meals at about 50.00.

So how much of an increase in allowance (or inflation) was that? Assuming the climb in minimum allowance from 50-150 took about 15 years, that's about 13% annually. That's much higher than the inflation rate published by the government. If I'm not mistaken the average inflation rate is about 6-8% annually.

Of course, this simple computation does not take into account possible increases in spending power of Filipinos. For all we know, the increase in allowance means that parents today earn more than their parents a generation before.

So, while foreigners still look at the Philippines as a Third World, or, a Developing Country, in my opinion there is quite a substantial middle class in the country. However, the middle class are those easily wiped out during economic crises. They are also one of those who stand to benefit right away in an improving economy.

What's the relevance of inflation? As you can see, whatever you spend today, you will likely pay more for the same services a few years from now. Given this (frightening) set of numbers, I wouldn't be surprised to see children receiving 500 a day in my lifetime.

You also have to think about yourself. If you want to retire respectably and be able to afford future expensive healthcare expenses, then you better start saving... and investing for the future.

Going back, as you can see, you don't have to have an economics degree or any degree for that matter to know about critical information that directly affects your money.

Learn how to use your common sense. Unfortunately, common sense is not taught in school. It's taught by your parents and brought about by the experiences you go through. Too often people tend to stick to textbook style thinking and problem solving, failing to see that problems are simple if you just use a little bit of common sense.

So if you use your common sense, then you'd know that saving now is better than saving later. Further to this, it's better to invest now, than saving now. Ciao for now.

Some Trading Insights

2010-03-07T02:24:00.000-08:00

Apologies that I wasn't able to post anything last week.

I live a double life. The other life is that of excitement, espionage and entrigue hehehe.

Seriously, There were just too many activities at work that my personal time was spent on resting.

I wish I'd be able to quit my job and just focus my efforts on trading for a living. Supposedly, that's possible. Perhaps in a bull market, you can. But only with proper tools like Technistock. It's an expensive tool though as you are required to pay a monthly subscription fee. But it's well worth the investment for as long as you're running with the bulls.

When I was a subscriber in the past, I let my technical analysis lessons take a backseat and just focused on the price action and the buying momentum. I believe this is a technique called tape reading. I was able to trade with greater success.

Of course, being in a bull market certainly helps a lot.

Personally, even if trading for a living were possible, it's still better to have a regular source of income called a salary. Besides, if you're employed in a good company you also get some benefits like company health insurance and then some.

However, when you're working, you can't afford to trade, at least the short term trading sort. Short term, at least for me, are the trades you do in one day called day trading - you're in and out the same day - or those you hold on for not more than 3 days.

The reason why you buy these particular stocks is called "buying on breakout". You don't know the story or why it's going up but you just buy it because it's gone up substantially from its normal price range. Even if you have a crude charting tool such as the one in the PSE website, you can more or less gauge if it's a breakout.

Of course, you should not discount the other indicator - volume. Volume should also be higher than its usual volume. Both indicators - the price chart and the volume are all available in the website.

Breakouts last for not more than 3 days, as experience reminds me. There can be exceptions of course, but if I were you don't tempt fate and be content with your earnings. Greed kills. Really, it does.

You can still trade even if you're employed but you will have to trade the "big waves" so to speak. Since your work is 8-5, and trading hours is 930-1210, you can't possibly look at the ticker.

What you can do though is select a few stocks that you can monitor after office hours. Of course this goes without saying that you have some sort of charting software. You might try using the charting available at PSE.

By selecting a few stocks, you are focused in your approach. You know more or less when they hit their highs or their lows. This means limiting also your exposure to the stocks that you know. This requires the highest level of discipline as most, if not all, are always tempted to make a quick profit by trading speculative stocks.

Remember greed? Greed happens both ways - when you're holding on to a stock or when you're just about to get in.

Now if you don't have a charting software, the other alternative is to just read the newspaper. Look at the prices and what the index level is currently at.

Wait for that correction, it will necessarily come.

Then wait until the market index correction has been substantial, usually about 5% and start buying some quality stocks, ie the blue chip stocks. Remember, wave 1 = blue chips, wave 2 = second liners, wave 3 = basura stocks, wave 4 = it's your turn to wave goodbye (at least momentarily) to buying stocks.

While the index is down by "just" 5% the stocks may have lost even more. This is tricky though as you also have to know if the entire market is in a bullish, bearish, or sideway mode. Read the news, watch CNBC, watch Bloomberg. It takes some time but once you've watched them a couple of times you'll know if the market is in either one of those modes I mentioned.

I hope I was able to offer something new and useful to you. I also recently finished an article about investing in stock / equity mutual funds, so my mind has been lacking as of late with regards things to write about. Until then...

The Breakout ... then the Breakdown

2010-02-20T19:18:00.000-08:00

For local stock market players, they saw this week the meteoric rise and spectacular fall of IP - all in one week. The lucky speculators made money while newbies may have lost money and are now IPit. Tough luck? I suppose.

I'm not surprised most people are still turned off by the stock market. With movements like these, most of the general public still think that the stock market is just one form of gambling. It can be... only if you are a speculator and not an investor.

When you're a speculator, you can gain a lot, and lose a lot more if you're not careful and especially when you're greedy.

As previously mentioned, I don't review charts anymore for the simple fact that I don't have the software. When I trade, I just employ hit and run tactics, or buy on breakout and sell once it hits the second or third day. On average, I've noticed that stocks that breakout (i.e. price goes up from the usual trend of more than 5%) only last for up to three days at the most.

There are some stocks though that go up continually and if I'm not mistaken this was what happened to ORE recently. I don't know why it went up.

Mostly, these breakouts are fueled by speculation and stories of interest. If you didn't already know, E-Games (EG) was listed this week via introduction (don't ask me, I'm not particularly familiar with what it means). Since IPVG (IP) is the owner, its shares went up. Again, I don't know why. Perhaps it would add value to the mother company since listing of shares is one way of raising capital.

Whatever the reason, the stock went up. And it went up in style.

It went from 2.02 last Feb 15, to 2.70 to a high of 2.80 on Feb 16. That's a one day profit of almost 40%! You can't get that deal from a savings account nor a time deposit. Of course, with great price swings come great risks. After Feb 16, the stock just went downhill.

On Feb 17, it opened 2.70 only to close at 2.36. Following the bearish close of 2.36, it fell further to 2.12 on Thursday. By Friday Feb 19, the stock was only worth 1.98.

So if you did not sell on Feb 16, you actually lost money!

How will you know when to get out? I don't but charts can help.

I didn't read the chart in the first place though I doubt chart reading mattered for this stock. Again, while technical analysis (TA) is a good friend for any trader, you must also understand that at any given point, you should also be aware of the story. The story for IP was EG. There was no other compelling reason to buy the stock.

I guess common sense and having an honest and objective broker (yeah they exist) can save the day for you.

I'm still a believer in TA, but you also have to combine it with other disciplines, whether it be fundamental analysis, or just simple common sense. Of course, being less greedy would help a lot as well.

Until the next post...

What stocks to invest in 2010?

2010-02-13T05:06:00.000-08:00

It's a good thing the market has rebounded from its lows. The 3,000 level would prove to be a psychological resistance in the near term. The market apparently shrugged off the news of potential brownouts in the nation's capital due to positive movements in global indexes (and the possible rescue of Greece).

The market will probably have some pretty wild swings in the first - and probably second - quarter of the year as the Philippine election story starts to unfold. In an ideal world, i.e. a world sans the financial crisis, there are supposed to be stocks that should pick up in an election year. (I think we're still in a crisis, but as governments worldwide start planning their exit strategies, it's a surer sign that economies are stabilizing.)

What stocks could these be?

Well, let me first give a disclaimer. I don't have any charting software. I don't have access to brokerage reports. And, I also don't have any inside dibs in any of the stocks/companies I'll mention in a short while. I'm just basing these suggestions purely on common sense. Buyer beware please. Investments entail risk and if you make a wrong move, you can see your capital losing worth by double digits.

Continue to buy "defensive" stocks. If I understand correctly, defensive stocks are utility companies - power generation, power distribution, water distribution, telecoms and healthcare. Of those listed I am looking at AP, EDC, FGEN, MWC, MPI, and of course TEL.

The reasoning is that even if the economy stays flat, companies and individuals will continue to use the phone, take a bath or use the computer. If the economy picks up, power usage goes up, people eat out more so water usage will follow, there'll be more cellphone usage as opposed to landline. The problem for the power and water distribution sector this year? El Niño baby.

What about election plays? Well I suppose that'll be the media stocks, that is - GMA and ABS CBN. I'm pretty sure their first half revenues will shoot up due to the ad spend by the "friends of (insert politician's name)". Another possible stock that may rise could be JFC. Perhaps those running for office would distribute Chicken Joy whenever they make their campaign runs? URC / SMC / PIP could also benefit.

Pure speculation stock for 2010? VLL! I'm sure the stock will fly if Villar wins the presidency. Hehehe.

One caveat for investors is that unlike foreign exchanges, ours is quite volatile because we are at the mercy of foreign brokerages. If something pushes up their fears about our market, they dump even the above quality stocks like there's no tomorrow. Of course, if you're a investing for the long term, this is of no concern to you. In fact, these could be buying opportunities.

Also, most of the local major companies and conglomerates have tightly held shares, and the owners and the management team don't always change. This means whatever they're doing good will continue for as long as they're led by the same group of people. So, if their businesses are doing well under their management, you can more or less predict that this will still be the case in the foreseeable future.

Fall from Greece

2010-02-06T05:37:00.000-08:00

And you thought that the market would go up January. Historically, the stock market goes up in December and there's a follow through in January. After reaching a high of 3,121 last January 14, the market has tripped all the way to 2,855 last February 5.

A 9% drop in value.

This is just the index. What about individual stocks? Well, they're definitely much worse, sad to say. A few posts back, we mentioned that the market was ripe for a correction. One of the critical signs that the market is about to peak is when basura stocks are going up like crazy.

Who would have known that we'll be where we are today? Markets worldwide just fell through the roof.

Of course, warnings are just that... warnings. Nobody can predict with precision when exactly these corrections happen. It's just wise to stay ahead of the curve. But how?

I suppose when you're more careful, you'll be less and less exposed (i.e. invested) when you have a nagging feeling that the market is close to a peak. One way of staying ahead of the curve is to be able to read charts. Now, a charting software is in order.

The PSE has its a site with crude charting available. If you don't have a full fledged software, you can just stick to what they can offer.

The first step is not just looking at your favorite stock's chart but to look at the entire index first. Your stock will just follow the direction of the index.

If you don't have the patience or attitude for chart reading, you can just read the news and just look at the overall trending. Obviously most of the news have been negative, recently, there's been a focus on Greece and its potential for debt default.

Because they're part of the EU, most of the European share markets fell. For one reason or another, other markets in the world, notably Asia were also dragged down. The US market is also in the brink of falling through the 10,000 level. Wonder if that will happen.

Of course, the falling of these markets is not entirely due to the default risk of Greece. Unemployment in the US is still high, the Chinese wants to impose tightening, metal prices and oil are falling across the board. Perhaps people are doubting the recovery story.

Most of the markets may have gone way ahead of themselves last year. Now that people realize that the recovery isn't one straight line up, doubt and fear have set in. When that happens markets fall.

If you're a trader, now is not the time to be buying. Wait for some signs of stability.

Warning Signs of a Bad Financial Advisor - P. 4

2010-01-30T20:36:00.000-08:00

Welcome to the last set of the "Warning Signs of a Bad Financial Advisor" series. This first one came out a few posts back.

The entire series is borrowed from Suze Orman so please visit the actual slide show over at CNBC.

Without further ado...

2. Advisor Wants a Check Directly Made out to Him/Her

The ultimate warning sign is if the advisor asks you to write a check made out to him/her personally. Every check is to be payable to an institution. (i.e. TD Ameritrade, Schwab, etc.,) “This is absolutely essential. More than one "adviser" has flown the coop with dozens of clients' money’ Suze says.

My take -

I think this is pretty obvious, but even if it is, there are still people who are too trusting and fall victim to clever scammers. I'd take it a step further by also asking for a provisional receipt if an original receipt cannot be issued yet. The receipt serves as proof that you paid for something.

And the last one...

1.They Don’t Inform You of Changes

The last warning sign is if your advisor doesn’t inform you of any drastic changes. Suze explains, “If a stock has gone down, or is not performing the way he or she expected it would, you are to hear about it from him/her, not read about your money first in the newspaper.”

My take -

Even the good financial advisors often forget this. It's a service to the client and shows transparency. Of course, this is assuming your financial advisor actually has any knowledge about what's going on. They usually rely on what their head office feeds them anyway.

*******************

Okay, that wraps up this series. I hope you've learned something new as much as I did. Money can be earned if you've lost some in investments. The general rule is that as you grow older, the more conservative you should be with your funds.

Until the next post!

Warning Signs of a Bad Financial Advisor P. 3

2010-01-24T06:58:00.000-08:00

Continuing into part three of a series.

5. They Don’t Have Answers to Questions or Concerns

Beware if your advisor doesn’t get you the information you request about an investment. They should answer any questions that you have about how you’re investing your money.

My take -

Couldn't agree more.

4.Legitimate Monthly Statements

Your advisor should send you a monthly statement summarizing all that month’s transactions, including deposits, withdrawals, and current positions held. This statement must come directly from the brokerage firm that's holding your money, not from your adviser's office.

My take -

Well most financial consultants here will sell you mutual funds, variable life insurance products, as well as other insurance and pension products. If you are investing in bonds or stocks, chances are it's through the bank manager - friend or your stock broker. This being the case, then I'd assume that the statements will come from the bank or the stock brokerage firm.

If these are mutual funds, then you should be receiving statements from the mutual fund company unless you opted for online statements.

I can't speak for how scammers work though I'd think that these companies also send you a statement just to convince you that they are the real thing. I wrote a blog entry in the past on how to spot investment scams.

3. They Don’t Send You Quarterly & Annual Reports

You should receive quarterly and annual reports from your advisor. These reports explain the return your advisor is getting on your investments, as well as all fees and commissions. The figures on his/her report must match the report that is generated directly from the brokerage firm.

These reports should illustrate all the realized gains or losses (all the money you actually made or lost from selling an investment) and all the unrealized gains and losses (investments you own but have not yet sold and thus that have not yet realized a profit or loss). These reports should also include returns of the overall index. You want everything on paper

My Take -

I would like to believe that the mutual fund companies do send you these kinds of statements. For UITFs though, you'd have to record the gain or loss on your own. The NAVPU are reflected daily in the bank's website anyways.

Well I hope you are taking these lessons to heart. See you in the next entry!

Warning Signs of a Bad Financial Advisor P. 2

2010-01-15T18:57:00.000-08:00

Welcome to Part Two.

This is a continuation of last week's post. Please go over here to get the actual post of Suze Orman.

We said that we'll use her 10 signs and compare it to the local setting. Let's move on.

7. They Want to Meet with you Alone

Your advisor needs to understand you and your partner’s financial emotions. If you’re married, have a life partner or are responsible for someone else’s finances, the advisor should never want to talk to you alone. Suze says, “Any advisor that wants to see you alone – something is wrong.”

My take -

Of course, it's obvious that this is applicable when you're planning your finances with your fiance, wife, or even your parents. Still, if you're just planning for your own finances, it's always nice to bring along a friend or a colleague. It always helps when somebody plays the devil's advocate.

6.They Don’t Ask About Your Needs

For example, your advisor suggests what you should invest without asking you questions such as - do you have credit card debt? Are you healthy? Is your job secure? Do you want to buy a home? Do you have will? Do you have a trust? Do you need a new car?, etc.,.

My take -

I couldn't agree more. Local insurance agents, real estate brokers, financial advisors just tell you that you have to invest, but do they guide your decision? Real estate is a good investment, but do you need it now? A mutual fund is nice to have, but are you ready to take on the risks?

Before you plunk down your hard earned money, consider the following pointers -

a. Pay your debts first. However, this is just a general rule. There are debts that are okay to
postpone paying if the money for debt payment can be used to invest in something that
earns you more.

b. Set up your emergency fund.

c. What exactly are you investing for? Retirement? A house? An MBA degree? A business?

d. If you should get sick, do you have enough funds or have health insurance to cover
yourself?

e. Ask for a second opinion. Most often when you're afraid of telling somebody you trust
about where you're going to put your money into, it's driven by two things - fear or pride.
Fear is fear of rejection from your peers and family. Pride because you know you're unsure
about it, and you don't want to hear somebody else confirming your doubts.

f. Are you taking care of somebody sick?

g. Ask the financial advisor if he has purchased any of the product he's selling. If he hasn't,
why?

A needs and priority list should be in order before you sign your order ticket for a fund or reservation agreement with a real estate company. Trust me, most of these companies have your needs at the bottom of their priority list.

See you next week!

Warning Signs of a Bad Financial Advisor P.1

2010-01-09T00:33:00.000-08:00

A few days ago I stumbled upon this article by Suze Orman down at www.cnbc.com. The title of this blog entry is exactly the same as the one she wrote. There's no better title for it.

I think that as we start the year 2010, before you think about investing your hard earned money, know first if the person you're about to talk to can be trusted.

While her list is quite complete, not all of them may be applicable to the local setting.

Here are the warning signs -

10. They Rush You

You meet the advisor who says there’s a deadline on the investment. Suze explains, “There is NO investment out there that you have to rush in -- especially today. They are a salesperson and not a financial advisor.”

My take -

I think this is a fair statement. While you shouldn't dilly dally with investing your money, there's no need to rush either. Your money should be invested soonest, but your decision on what and where to invest shouldn't be rushed.

9. They Don’t Tell You How They're Paid

There is a cost associated with any investment that you make. It is most likely that you will pay the advisor’s fee, load or commission. The advisor needs to be clear on what it’s going to cost you.

My take -

As that hackneyed statement goes, honesty is the best policy. A financial advisor who is fully transparent with you earns brownie points. Further, you know this person can be trusted. This will also avoid any misunderstanding between you and your financial advisor. You shouldn't be shy with your questions, so fire them away!

8. They Want to Put Everything in One Investment

“Be very wary if your financial advisor wants you to put all or most of your money into one single investment. You should diversify your money…. You don’t want to put money above FDIC limits, or state guaranty limits on annuities.” - Suze

My take -

Another cliche comes to mind - Don't put all your eggs in one basket.

If you are fortunate enough to be financially well off, don't put all your money in properties only as they are highly illiquid investments. If you're just starting out, don't put all your money in stocks or stock heavy mutual funds or UITF's. You need to balance it off with some quality bonds.

***************************
Will be back with the rest of the list in the next post. Happy Investing!

2009 Yearender Post

2009-12-30T06:09:00.000-08:00

Before 2009 ends, I would like to review some of the articles I posted in the past 12 months.

I realize I didn't make any real bold predictions for 2009 although I was extremely bearish in the last month of 2008. I made mention of Philex and surprisingly, Philex this year flew like crazy, but it was more due to speculation than gold prices. I won't give myself credit for that.

When the financial crisis struck, I remember everybody was predicting the end of the (financial) world yet here we are now - global stock markets are alive and kicking and economies around the globe are actually recovering. So I (and the rest of the people out there) may have been overly bearish last 2008.

But are we out of the woods yet?

The economic recovery in most countries worldwide is - in my opinion - due to the government intervention. The stock market on the other hand, picked up because of a lack of attractive investment vehicles. Real estate? Perhaps not. Bonds? Yes, but they're not as exciting. Personal and bailout money needs to go somewhere and it may have found its way to the equities market.

So what will happen in 2010? I won't predict what will happen globally but I'll take a crack at predicting locally.

I think oil prices will rise again.

Stocks will consolidate February to probably May, and then start to rise again to reach a new high for 2010. Then there's the election (if it pushes through). However, the rising of the stock market after May is highly dependent on who wins the Presidency and how high oil prices will be.

On a lighter note, I'd like to make some useless predictions - - - -

1. A young matinee idol will get pregnant...

2. ... And the young dad won't acknowledge his responsibility.

3. Another singer makes it into the international scene...

4. While a local singer drops out of the limelight due to a scandal.

I could go on and on and I am starting to get carried away... so I'll go back to the heart of my post.

Looking back at some of my older posts, I particularly found this interesting piece on how to make money in stocks. I don't want to blow my own horn so you can read it for yourself and give your comments.

I don't have any experience trading bonds so I would suggest you take up a mutual fund, or, buy retail treasury bonds issued by the Bureau of Treasury, or, buy corporate bonds. Perhaps I'll write something about bonds in the future. I actually have one published in a local digest. If you need copies, just email me at guerillainvesting@yahoo.com.

Until my next post next year (which is next week), HAPPY NEW YEAR!

Not a Christmas Message

2009-12-24T21:21:00.000-08:00

Ever since I first stepped into the floor tiles of a Fully Booked store a few years back, I have fallen smitten in love with them (i meant the store, not the tiles).

No more sales ladies who got my book titles wrong, no more quizzical looks from these sales ladies ("author po ba iyon or title?"), no more odd arrangements of books, and more importantly, no more lack of book titles to choose from (especially business books)!

Business books are quite expensive; but, like any business you put your money into, they're an investment worth having. I suppose that's a better way to spend my money than buying a new set of clothes. Sometimes you wear (and recycle) your clothes over and over that you forget that it's been the same set of wardrobe for over a year already.

Personally, I think that as you age, so does your wardrobe. When you're younger, you're more particular with the way you look. When you're older, you're more particular with the company you're with. Being in good company means nobody judges you based on the brand you wear.

Of course, the exception is when you rise up the ranks. You become a manager, you become a president. You shouldn' t be looking shabby.

Going back, business books particularly investment titles have always been sort of a treasure hunt when you looked for them at the leading bookstore chain. They were such a rarity you had to buy the book right away or risk losing it to somebody else. That last line sounded like it was paraphrased from a romance novel.

So when somebody goes abroad in the past, I'd always ask them to buy me so and so investment and personal finance books. So now that there's Fully Booked, I thank my lucky stars that I don't have to wait for a fat bank account to go abroad and buy them books. (But then there's amazon).

The current generation are definitely better off than those who were born earlier.

Merry Christmas! In my next post, I'll dig into some of my old posts. It's time for an annual review!

The Weekender

2009-12-12T06:46:00.000-08:00

Our market recently fell below 3,000, only to recover last Friday. Has the market finally found its peak? I would have wanted to review the chart, alas, I don't have any.

Some of the stocks that went up (and that really caused me to raise my eyebrows) -

Atok Big Wedge (Ticker: AB)
Macondray (Ticker: MRAY)
Philrealty Holdings (RLT)

LIHC went to as high as 12.75 sometime this week and then fell to 10.00 before closing at 10.50 Friday.

I'm just going to repeat my message - be wary of the market. Speculation is the name of the game and the bubble that it will create could burst soon.

The dollar is picking up. My personal opinion is that the dollar will increase in the medium term. But, in terms of the relation between peso and dollar, there will be a lag effect because in December, the peso is historically stronger due to the OFW remittances being converted to peso.
So if you are a speculator, then you can use this month as a window of opportunity.

Remember that investing is different from speculating. If you think that you need the dollars for a future dollar denominated expense then by all means go for it. Otherwise, don't buy dollars (or any other currency for that matter) just because "you know it'll go up". Like that a book title I saw recently in a bookstore, "Hope is not a strategy."

Just a Commentary

2009-12-06T05:54:00.000-08:00

I wasn't able to trade much of the stock market rally this year primarily because I was driven away by fear. I only started to take notice of the stock market when it was already July, and by then a lot of stocks already had a good run up, particularly the blue chip stocks.

I also dropped my Technistock service due to the lackluster performance of the stock market in 2008. There was no money to be made, only money to be lost.

Technistock was a great service because not only did it have charting (although incomparable to Metastock), it was linked to the stock market. The ticker moves in sync with the main board at the PSE so if there's a hot stock for the day, you can become an instant day trader. You know what stock to buy based on the momentum of buying.

Perhaps if the bull market returns, then I'd reconsider booking my subscription to their service.

So now, I just rely on the Reuters website (thanks to a friend for the tip) and read the news from time to time. The chart gets some getting used to, but it does serve the same purpose, albeit not 100% as efficient as I'd like it to be.

Last week was a dull week, at least for me. I missed out on ACR which made a nice move in a span of about 2-3 days. I don't know why it did though. I think there was something about mining rights there.

I'm still on my toes when it comes to the stock market as most of the stocks going up are the third liners and basura stocks. I would believe that the bull run still has legs if the blue chip stocks can inch higher and the volume is high. Remember, the index has risen by a substantial amount since the 2nd quarter of this year.

I personally think that the stock market has three waves -

The blue chip wave - bullishness creeps into the market, foreign buying is back

The mid cap wave - local players follow the lead of the foreigners, and they also start buying the mid cap stocks or second liners

The tidal wave - all sorts of rumors of backdoor listing, new mine find, speculation, enters the market and a lot of basura stocks and "dead" stocks are reincarnated. This signals the end of the bull market and means that the market is already at its peak

I think most of the stock prices have gotten way ahead of the actual profits the companies will be declaring. So that's a cause for concern, definitely. Then again, our index is still above 3000 so bullishness may still be alive.

Against a backdrop of lousy economic data, I wonder if there should be reason to be bullish for next year.

One thing I'd propose you to look at is the level of money supply. These days I'm sure people are out hunting for good returns. If there is excess money, then obviously, some of them may find its way into the stock market, thus spurring another run. And it doesn't have to be directly invested in stocks. Money can find its way to mutual funds, UITFs, insurance policies, etc, and the fund managers of all of these will just invest them in either the bond market... or the stock market.

Dubai was supposed to be a shocker, but the markets (outside of Dubai) seem to ignore it. I think that if there's another country that faces debt payment difficulties, then it just goes to show that the world economy still has a long ways to go in terms of recovery. It seems people are ignoring the bad news, and perking up their hopes based on the little good news that's out there.

The problem for next year could be oil prices. Due to speculation that the world economy will recover, buying up the contracts and what not may cause oil prices to rise faster than most economies' ability to grow.

The problem will just begin when that time comes. So don't forget to set money aside for a stormy day. The time for joyous celebration has not yet arrived.

Investing ... or speculating? (continued)

2009-11-27T19:08:00.000-08:00

I was that blunt and the friend pondered about what I said. The friend agreed that that was true.

So that was my cue to say that there were more to investment decision making than just listening to what your other friends are doing. I also told the friend that before deciding on what kind of investment to take, an emergency fund should be put up first.

People are far more interested to get into the action rather than planning ahead. What does this mean? People want to see their money grow right away without considering if they have money set aside for a stormy day. Humans are generally a greedy bunch.

Instead of asking, where can I invest? You should first ask, where can I invest without risking my near term prospects? I.e., if you have paper loss sometime down the road, do you have money to keep you going (and living) if you should lose your job or lose a business?

To know if you are just speculating or actually investing with your investible funds, here are some possible "indicators". -

1. You focus on the short term, rather than the long term

2. Fear drives your decision to sell...

3. ...and Greed drives your decision to buy a new investment

4. Your decision is anchored on hope and slight delusion (a stock has fallen by 15% and you still think that those behind the stock will support it and it'll eventually recover more than 15% sometime soon)

5. Where there's smoke, there's fire, and more often than not, you get burned

6. You are fidgety, checking your investments more often than you have to

7. You boast when you have paper gains, and then gloat when you realize them...

8. ... and you don't tell anybody when you take a loss or have a paper loss...

9. ... or if you did tell someone, you just go back to telling your "war stories" of "I earned so and so in the past"

Speculation is gambling. You might have better chances at the casino than in the investment world.

Investing is based on logical decisions. You don't have to be a fundie or a technician to become an excellent investor. If you know how to save money, then you're already on your way to becoming one.

Investing...or speculating?

2009-11-23T04:35:00.000-08:00

A friend of mine asked me a few days ago if it was time to buy the dollar.

At first, I was hesitant to answer. How do you give financial advice to a friend without sounding like a know-it-all?

I just gave a straight and honest question -

Why are you buying the dollar?

No words were uttered.

I broke the silence by asking the person a few more hard-nosed questions -

Are you using the dollar for something? e.g. going abroad, paying for something, among others.

Then I further told the person that if there is no need to use the dollar, why bother buying the dollar? I said that there are a lot of peso investments out there like mutual funds and unit investment trust funds, the stock market, bonds, etc.

Then I was greeted by the million dollar (or peso) cliche -

The person had a friend who bought dollars before, and then kept it for a long time, and "is doing well now."

For a moment there I felt like the words were taken from my mouth.

Flashback to a few nights ago, I was watching the Suzie Orman show. There was a caller who was asking if she should take the advice of her good neighbor who happens to also be a financial advisor. The neighbor was suggesting that she take some big investments in a fund (or some such).

Suzie Orman then probed further, how many years has her neighbor been a financial advisor? The caller said that it's been about 2 years. Obviously Suzie was not in favor. In fact, she went into hysterics.

The friend asking me was experiencing the same dilemma.

Just because a friend has the best intentions mean that they are giving you the best recommendations.

To be continued...

MP, Metro Pacific and Manny Pacquiao

2009-11-14T21:07:00.000-08:00

The index recently broke the 3,000 barrier and closed up at 3,034 last Friday for the year. Due to losses in the US (and perhaps people cashing in to bet for Pacquiao-Cotto fight) the market lost momentum on the 13th. Philex also lost its luster Friday and fell by 14% to 16.75, bringing down with it the mining index. Those who bought at the 19 range better be wary.

Having risen by 100% in such a short time may mean a free fall in also the same short period to God knows where. There is no strong support for the stock having risen continuously when it breached the 10 barrier. The good thing though, at least for those who bought at the 13 level, is that they still made money (assuming they exited at 19). That's still almost 50%.

I could be wrong.

The performance of these two stocks this year - Meralco and Philex - reflects the state of our market. It is both bullish and speculative. Basura stocks are gaining and even blue chip stocks are being speculated upon. Some of the other winners for this year was WEB, and the Angping stocks, especially Nihao is back with a vengeance. As we reach the year end rally (hopefully), you may wish to take the time to think about 2010.

If you think 2010 will be a better year, then hold on to your stocks and buy the corrections. Otherwise, this could be your time to scale back and take profits while there is one. I wanted to look at the volume, as well as the amount of foreign buying for this year, but I don't have access to those information. Those are also good indicators as to the sustainability of the recent bullishness in the market.

Winners during the past week were Philex (double your money in less than a month, code: PX), Century Peak Minerals (code: CPM), Alsons Consolidated (Code: ACR), I-remit (I), and TK Steel (T). There were also other stocks that rose, mostly basura stocks, and index issues. The worst performer, at least based on the stocks that I monitor, was Metro Pacific, falling by almost 30%. What's amazing is that they recorded huge revenues.

The stock price perhaps does not reflect the correct value. At least for now. Having made so many acquisitions, as well as the possibility of diluting shareholders, bearish sentiment has killed the stock. But as Buffett is says, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

I visited their website and looked at the businesses they now hold - hospitals, toll roads, water utilities. These are businesses that do well when the economy is good, and don't suffer as much when the economy is bad.

Using common sense, I think Metro Pacific is a buy, although it will definitely be a long term buy (as long as 2-3 years from today) as we still have to wait what happens when they list new shares (unless they've done so already, I don't track the news that much). Its 52-week high is 7.10 and 52-week low is 2.08. Trading volume for the stock has increased substantially this year. But of course, there's the threat by GSIS over the recent acquisition of Meralco shares.

GSIS killed Meralco last year and they migh very well do the same for MPI this year. Sniff the news whenever it's out in the press.

I also don't know much about financial ratios so I don't bother reviewing them. What I do know is that perhaps, there's a lot of debt going around at MPI.

Of course, this is just my opinion. Investor discretion is advised and you should consult with your own financial advisor. Investments take time to generate consistent cash flows and 3 years is about the right time frame to expect the kind of revenues that MPI holdings should have with its current portfolio of companies.

**************
At least the other MP (not listed in the PSE) made winners of those who betted for him in today's fight. I'm talking about Manny Pacquiao. He beat Cotto with a TKO (hey that rhymes).

Congratulations to Pacquiao! I just hope he doesn't enter politics.

In the U.S., there's been an attempt to correlate Tiger Wood's golf games to the performance of the Dow Jones. Perhaps, we should do one for Manny Pacquiao and the Philippine Index.

Until then, be careful where you invest. Tomorrow may be another up day because of the euphoria as well as the positive end for the Dow last Friday.

Stock Market or Stuck Market?

2009-11-07T04:44:00.000-08:00

A few weeks after I posted about the lackluster performance of PX (Philex Mining), it made a high. Not just a 52 week high but I think an all time high. I do not trade actively anymore, much as I would want to, so frankly, I missed the boat (or train). I'm sure there were a lot of people who made money with PX.

I just hope newbies to the stock market don't get fooled and join the train ride. Looks to me there's going to be a helluva fall soon. I have a funny feeling that there is a mix of speculation and gold play in there, fueling its fantastic flight to 13.50. Lucky 13? Haha. But when there's speculation, then there's fire. So don't let your money get burned. Be on your toes if you bought this in the range of 13.

Gold is already at 1,100 in US trading, if I'm not mistaken. So perhaps PX still has some more room to grow. It's the only gold stock that's stable. Other gold stocks listed in the exchange don't have the stability that it has. And, GSIS is buying into it right?

Speaking of the government, I was heartened when I read news recently that the PSE is going to launch spot trading for selected commodities. Filipino investors should be given a wider array of investment choices outside of savings deposits and time deposits. While the growth of mutual funds and unit investment trust funds have risen to offer Filipinos more choices, I feel that these are still not enough.

The local market has not been that exciting recently, and I'm a bit wary. Lately, it's been speculation that's been driving the trading. Most of the blue chip companies have been flat, consolidating or worse, falling. I remember having learned from the horrors of 2007 that when the market is fueled by speculation, the bubble will burst soon. In Tagalog, kapag panay basura stocks na lang ang lumilipad, mag ingat ka na.

Even a (former?) blue chip stock has been the darling of speculators - MERALCO. The swings have been crazy this week. News came out after trading hours that Sy was rebuffed because Metro Pac exercised its first right of refusal - personally, a euphemism for biting the bullet. The bullet costs 300 per.

So it remains to be seen what happens to Meralco on Monday. I would think that the stock will be suspended in the first hour of trading, as is the usual practice when there's a major deal involving a listed stock. Perhaps it will go up like crazy, or it may not. I'm not endorsing a buy on it, but if you do wish to buy the stock, just be aware that the reason for buying it is pure speculation. (If you have a chart, then you can take a look at it. Unfortunately, I don't have a charting software after terminating my Technistock service a year ago).

So if you have money in the stock market, be careful where you put your money in the near term. We will still take direction from the US, and we are at the mercy of foreign brokerages, i.e. if they will buy up the blue chips or not. Of course, if you believe in a long term strategy then you can do peso cost averaging. The strategy would work, and perhaps you'd make money a year from now if the elections next year are relatively clean, and we get a President that has sound economic policies.

Bonda rito lang po

2009-10-17T07:48:00.000-07:00

I write for Tulay, an English fortnightly publication of World News (a local Chinese language daily). For some time now, I've been writing business articles after doing features and what not in the previous issues. I am supposed to contribute also to Money Sense, a personal finance magazine, but due to my work, I experience difficulties submitting articles. It disappoints me that I can't contribute as much. It means I have less time to give people ideas about investments, savings, et. al. (likewise for this blog)

Most of my later business articles with Tulay were about personal finance and retail investment opportunities for the local market. As I began doing those articles, it became obvious that the available instruments are redundant. There are too many providers offering you the same stuff. But don't get me wrong, these are all good and the fund managers and the banks managing the UITFs or mutual funds actually serve as institutional investors, particularly for the stock market.

The one market I would like to understand is the bond market. It's not as exciting as the stock market but bonds are generally accepted as safer security investments. Usually, most of the bonds issued are gobbled up by banks and financial institutions, and there's really nothing left for the retail investors.

Every now and then though, something does pop up as opportunities for the small investors. These are the corporate bonds and retail treasury bonds. The problem with these two types of bonds, at least to my knowledge, is that they do not offer this neat investment trick called compounding.

Why?

Upon investment of a bond, the interest is credited monthly to your account. So in effect, you're giving your money to the lender, letting him use it, and then returning it to you after 3 or 5 years - but only the principal because the interest has been credited to you already. Classic case of OPM, other people's money. Of course, that's just a jaded view of bonds.

The plus side of investing in these kinds of bonds is that you let your money work for you. So at least you can expect something quarterly that's higher than the regular savings or time deposit. But in the long run, you should also be looking at investments that have a compounding effect.

Compounding means that the interest you earn is rolled back into the principal, thus earning you more each time there's additional interest applied to it. Supposedly, stocks and mutual funds have a compounding effect.

What I do know is that they appreciate in value over the long term, so your original investment is getting bigger. So there's capital appreciation, but not necessarily compounding. Compounding will happen though, if there were dividends, and you invest it back to the fund or stock.

Compounding is also one way, if not the only way, you can escape the dangers of inflation.

Until the next post, invest wisely.

Spandau Ballet

2009-10-13T21:55:00.000-07:00

Recently, the stock market reached a new high for 2009.

Amidst the global recovery (of the stock market, not necessarily of the world economy), one metal has been shining - no pun intended. We're talking about gold. Gold has gone past the $1000 mark and is - according to experts and analysts - to continue its upward flight. Unfortunately, its performance is inversely related to the US dollar.

The dollar has continued to drop, due to concerns over the long term effects of the government bailout and inflation fears. There's also rumors circulating that some of countries round the world are considering dropping the dollar. Where there's smoke, there's fire. If that happens, then a new world order will be - err - in order.

Unfortunately, in the Philippines the closest a retail investor can get to gold is gold stocks. There's no exchange for gold, even though our country has some very good gold deposits. Buy jewelry? Word on the street is that jewelry shops don't buy back jewelry anymore.

If I'm not mistaken, Philex went up even before gold went to its current levels. And now, that gold is this high, Philex is.... flat at 9, falling through the roof from a high of 10.50. Sell on news that gold is high? Haha.

Weather you like it or not

2009-09-29T06:33:00.000-07:00

Last weekend, the phrase "saving for a rainy day" really drove home the point. The country, particularly NCR, Marikina and Rizal were besieged by heavy rains and flash floods. Ondoy, an unassuming and unappealing name will forever be etched in history as one of the worst catastrophes in Philippine history.

Cars were lost. Houses were submerged. Lives disappeared in the blink of an eye. Rich, poor, the famous and the masses, no one was spared. Catastrophes of this nature are the great equalizers. It is also a reminder to everyone that nothing is permanent in this world.

There are texts circulating that the government lied about the dam thing. That is pun intended. Instead of spreading malicious texts enriching the telecoms companies, spend your time and money looking for ways to help the most affected.

Usually, when I receive propaganda texts, the text stops with me. There's no point fueling the rumor mill.

What does bad weather have to do with investing? Well, as one can see, anything and everything in investments have risks invisibly written over it.

Remember the real estate broker that offered you sweet notes and hints about property being the most stable investment? Do you think people who survived Provident Village will be able to go back without undergoing a severe case of trauma? The question is if residents would even want to go back especially those who nearly survived.

It just underscores the fact that while you can choose where to put your money, you will never escape the four letter word called RISK. You can protect yourself against risk, so in this instance you'd understand that perhaps you should have property insurance, or in the worst case scenario, life insurance. Of course, there are intricacies and restrictions in such insurance policies and you have to talk to your broker if acts of God are covered.

What about the stock market? If our stock market were a mature market, the stocks that would naturally go up would be the basic goods companies - anything to do with food, water, shelter. So you buy food stocks, beverage stocks, construction companies. Since we are in the Philippine market, you can speculate but if foreigners don't buy the stock, you can be assured of holding to a stuck.

Stay safe and brace yourself for tough weather in the next few days. Assuming the weather prediction's right.

The PSEi, what now?

2009-09-19T07:42:00.000-07:00

While the DOW recently made a new high Filipino stock market investors only made new sighs.

Thanks to the drama unfolding between two previous lovebirds - Former President Erap and Current Senator Panfilo Lacson - TEL was rattled and its price fell, bringing with its weight the PSEi or the Philippine Stock Market Index. Perhaps it was also timing because the market needed a breather first, a healthy correction so to speak. How long... and low it will get, only time will tell.

The basura stocks are making a comeback and for this I am worried. There are only two reasons why basura stocks go up, IMO even though I only started investing in late 2006.

One is that it is a bull market and speculators just want to make more money now that liquidity is back.

Two, the bull market is near its peak, so it's time to be defensive.

I'm no expert so I won't proffer any forecast. If you want a good analysis though, please visit the latest technical analysis of the PSEi by Mr. Dytoc here.

Some other stock market findings -

Meralco, a recent darling speculative stock has fallen by the way side.

Gold is above 1000 but PX is just there.

TEL is down. So is the index.

There was news recently saying that we will have a mining boom next year. I don't know about you but last year they said that about 2009. Oh well.

I miss the days when I would trade using Technistock. It was easy to trade using that terminal. It was connected to the stock market so you could see the buying and selling momentum of any listed stock. Unfortunately, I'm now back to being a career person and just trade from time to time.

I now rely on four things -

Charts
Gut feel
Speculation
Common Sense

The third is not recommended for investors, only for traders with a stomach for risk. For investors, I still suggest you take up a course in Technical Analysis. Fundamental Analysis is also important but do you have the time to go over financial statements?

The second one, gut feel, may not be common to everyone. I don't pride myself of having an innate super ability called gut feel. I only have a batting average of about 70-80%. Usually my gut feel is held back by fear only to realize that I should have acted on it. That split second of indecision has caused me countless lost opportunities.

The last one, common sense, is based on your understanding of the news coming out of your government (where ever you are in the world). If you believe the numbers and think that the economy will grow then pick the sectors likely to be the first beneficiaries. Otherwise, just put your money under your pillow (although this isn't recommended).

Anyway, next week will be an interesting week. Also, keep in mind that the elections are coming. Unlike the US, election years in the Philippines cause the market to move sideways if my memory serves me right.

Thanks for dropping by my blog. I hope my post today is able to satisfy the readers who patiently visit my blog every so often.

Great Customer Service Exists in the Philippines

2009-08-22T21:17:00.000-07:00

I don't blog as often as I want to anymore; but, when I experience something good or bad (financially) or I have something (about personal finance) to share, I drop everything, turn on my computer and then sit down to blog about it.

While this is not related to personal finance and this happened weeks ago I think that it is still worthy of a blog post.

We regularly buy Gardenia branded wheat bread. From late July to early August, we experienced two or three times wherein the bread formed molds even though the expiration date was still days away. The first time we attributed it to weather. However, the second time it happened, we began to speculate.

My mother wanted to switch brands already but I told her to give it one last chance. She did. And quite unfortunately, during one breakfast, I accidentally ate a Gardenia wheat bread with molds. Partly due to my sleepiness and partly due to inactive taste buds, I realized it too late.
I was down to the last bite already.

I informed my mother about it and I informed myself via the internet for possible consequences of eating bread with a topping of molds. I realized that it wasn't going to be as bad as I feared it would. Obviously I had a visit to the dumpster to return to nature what it had created.

I'm quite fine now so I guess it's okay. For some reason, I'm quite lucky with food. Fruit fly on my soup. Hair underneath the garlic rice. When I was younger, we found a fly tucked neatly underneath our Domino pizza order. Yum yum. Some people have all the luck.

So anyway, when I ate the bread with the mold, that was the last straw. We didn't switch brands immediately. My mother called up the customer service hotline and we got the biggest surprise of all. It was a hotline that made sure they delivered customer service. You see other companies have hotlines that serve as mere repositories of complaints. But for Gardenia, it wasn't.

They informed my mom that they would visit us at home and retrieve the bread for investigation. And when they did, they replaced our bread and gave two more yummy flavored breads. I wasn't at home when that happened because if I did I would have taken a picture (them willing). They also sent a letter to us informing of what they have done and thanking us for informing them of their quality.

I visited their website today and the last paragraph on the page about their company states,

"By delivering uncompromising excellence in product quality and service, we consistently drive the market forward, setting standards for the industry to follow. At Gardenia, we make the science of baking an art."

Their customer service is truly a standard their industry peers (and other industries particularly telecoms, hello!) can emulate. So Gardenia, a big thank you and kudos!

P.S. Picture courtesy of their website.

Sense of (Stock) Direction and OTD

2009-08-08T20:17:00.000-07:00

Absolute Traders recently held their CAF last August 6, unfortunately I wasn't able to join. Being employed has its perks, but sometimes you miss out on your personal passions.

So far stocks/equities have been enjoying a good ride this year just when the "experts" said - during the first quarter of the year - that equities will have a tough ride this year. Just goes to show that the only person you can trust is yourself - as well as your ability to understand the stock market.

Then again, during the first quarter there was no evidence pointing to where the market would go. Judging from my impaired short term memory, I think the consolidation phase took almost a year. And if you've attended previous CAFs, you'll know that you don't trade during such periods of time.

There are people who just want to trade regardless of the direction (or lack thereof) of the market. I call this obsessive trading disorder or OTD. The consequence? People who have ipits (stuck), or, stocks they will hold ostensibly for "investment".

Symptoms of such behavior are aplenty, but the person afflicted with this disorder asks these questions and exhibit such habits -

(1) What's the new hot stock?
(2) What price do I buy? (asks everyday)
(3) When do I sell? (asks everyday, and, if the trade goes wrong, asks for eternity)
(4) What's the latest chismis (rumor)?
(5) Checks the net for the latest chismis if he doesn't get any from his "sources" (usually friends, the broker, relatives)
(6) Interprets the chart as always leading up, and if it's going down, "It's just a correction."
(7) Probably has the same reckless behavior when it comes to managing his money and expenses

Market activity has risen and perhaps the stock market will go up again (notwithstanding dire economic news). I can tell because there's been a resurgence of trading in basura stocks again. SMC is shopping around and selling around, unlike MPI who's just buying and gobbling up everything. Meralco now trades like a speculative stock.

Yep, the bulls are at the door and the bears are slowly jumping out the window.

picture is from MSN, I got this last year.

Simple Arithmetic & Education Woes

2009-07-25T05:07:00.000-07:00

I'm back and I hope my post sparks your interest.

In a different blog, I earlier wrote that the quality of Philippine education can be accurately assessed by the people who man (or wo-man) the department stores. Today, I realized that the cashier can also be a good indicator. In two separate instances (actually two fastfood joints), I was reminded that the quality of education in the Philippines is continually degenerating.

Probably this is my version of Freakonomics, but just by observing them you learn a lot of things. During lunch time today, I was with a friend and we went to a restaurant to (obviously) eat. It was already 1:00 in the afternoon so people were sparse and some tables were not yet cleaned.

We found a place to settle in and proceeded to the counter to order. After ordering, the comely cashier politely said, "Sir, total bill is Php 210.00."

I leafed through the bills on my breast pocket and realized that I had a 500.00 bill. I also knew that I had a couple of coins in my infamous coin purse (people who have seen it swear at me because I also store bills in it. It's a quirk).

So I replied, "I'll just give you Php 510.00."

The cashier just stared at me then accepted my bill. The cash register opened up and she took out Php 280.00 and gave it to me. "Here's your change."

For a moment there, I froze and my neurons sparked like wildfire sending signals to my mouth as it uttered the words, "Miss, shouldn't I get Php 300.00?"

The cashier was taken aback so her colleague came over and realized the situation. She asked her how much I gave and how much the bill was. The error was rectified thereafter. In what would be an embarrasing situation, her colleague took out a calculator and gently showed her why it was 300.00.

I thought that was that... who would have thought?

During the afternoon, I was to have a light snack with somebody.

Same scene, except that the restaurant was packed because it was mid-afternoon. After finding a quaint table, we decided to order already. After finishing our order, the cashier told me, "Your bill is Php 202.00."

I gave her a 1,000 bill, and she asked if I had 2.00 coins to which I answered in the affirmative.

The cash register opens and she gives me - surprise surprise - 790.00. What the...?

Anyway, it was resolved shortly thereafter.

Two times in a day? Maybe it's because of their harried state. But in the first instance, I and my friend were the only customer in line. I would believe this to be so for the second instance, but still....

People talk about the brain drain here and I couldn't agree more. In my current work, it's been a month already but I've only gotten a mishmash of so-so applicants for critical positions in my division. I thought that there are many people out there looking for jobs? It's either applicants are picky or there's no pool of quality applicants to pick from. So the story continues...

New Article In Money Sense May - June Issue

2009-06-12T06:22:00.000-07:00

Hi, it's been a while since I updated my blog. In the interim, I would like to hype something - articles that came out in the May-June issue of Money Sense.

Hope you could support the magazine.

@#$%

2009-05-29T16:55:00.000-07:00

After ranting during my last post, I was looking forward to some positive posting. Little did I know Friday would be another one of those @#$% days.

What's worse than being left out of the market?

Knowing what to buy, being held back by fear, then realizing your error after.

I'm talking about MPI. Metro Pacific Investments.

As early as late last year, I was already looking at this stock. It wasn't because of the FS, it wasn't because of the charts. It was purely on gut feel and knowing what kind of businesses they have.

You might say that's a load of crap, but I was really looking at it. Think about it, a tollway business, property (and a possibility of selling Landco Pacific), and more importantly two hospitals.

Followers and readers of my blog for a long time would have read an entry of mine last November regarding healthcare, albeit short. So if I'm bullish on healthcare, naturally I'd be looking at MPI with keen interest.

Last post I said I don't normally hype stocks - and I'm not hyping it now. Because if you've seen its performance yesterday +28% from its Thursday close, then you'll know that hyping is the last thing on my mind.

I was again left out. What's worse, during the morning, I called up my broker, and out of instincts, I said could you check up MPI for me?

@#$@#$#@$#@.

What ever your comments are of this post - or of MPI - what I can say is that in the future, MPI will be big. You will have to take a long view. And with Manny Pangilinan sticking around, MPI might well be Manny Pangilinan's Investments.

In 2006, I kicked myself in the arse because I also made another mistake - with IPVG. During that time it was just doing 1.00.

Crap.

Disclaimer: Again, I'm not offering investment advice for you to buy or sell MPI, or any other stock for that matter. The decision really rests on you. Know what you're getting into first before you take action.

Left out of the Market

2009-05-25T07:12:00.000-07:00

I've been out of touch from the stock market since people started calling the market a bear. Yet since last December, stocks have quietly gone up by an average of 20 or so percent. Hell hath no fury than a bear market rally.

As I read somewhere, timing is everything. It's that art that only a handful of people have learned. Or even understand. It's not just with the stock market that timing is key, in business, in life, in love life, or in loveless life. Timing is always crucial.

Nobody can predict the direction of the stock market. Neither do the pundits and know it alls who annually send out price targets.

Those who entered the market in 2007 are still busy counting their losses while those who're experienced in trading must be laughing all the way to the bank (provided the bank is not yet in default).

Ever since I got back to working, I've had little time to look at the market, much less to trade. So for those who are intent on learning how to trade, make sure that you have time on your hands. Otherwise, you'll just join the ranks of the weeping toms.

Ever since I started blogging, I never failed to write about trading, investing, et. al. I usually avoid endorsing or rumor-mongering a particular stock. I don't know if it appeals to readers, though I really couldn't care less.

In a bull market, everybody is a genius because anything you buy goes up anyways. It's in the bear market where the machomen are set apart from the sissies.

I'm neither though I still long for the bull market days.

Blog articles like these are what happens when people like me don't get to enjoy the upswings of the market.

So enough of that I guess, back to work work work! More on investments and less of my complaints in my next post.

Investmenployment Part III

2009-05-10T07:50:00.000-07:00

I'm back from outer space!

I recently watched Star Trek; and, I must say that it's a great reboot for the well loved sci-fi series. It does away with too much of the philosophical ramblings and replaces it with the right doses of action, humor, romance and suspense. Backed by a great story and supported by a talented cast, it's worth the price of expensive admission (these days).

Thanks for dropping by every so often even though I'm really falling behind my posting schedules.

I ended my last post saying that I'd give an example about being driven to have a successful career.

In my previous incarnation, I used to work for a multinational. The work involved a lot of traveling and we were allowed to hire drivers during these frequent trips to the provinces. I'm very particular with how the driver drives so I usually call for my suki driver.

Let's call him Grill.

I called on him a lot during my four years at said company. We saw each other almost every week. That being the case, we had a friendship going on. During the 4-5 hours drive, we'd talk about a lot of things. (It is important also to chat with your driver to make sure he doesn't sleep on the steering wheel). He also shared a lot about his years being a driver.

When he was starting out, he was a bus driver. He told me that he used to go along the Quiapo to Makati route. He did so for about 4-6 years. After that, he worked as a hotel driver for another 2 years. Then soon after, he found an opportunity to work as a driver for a rent-a-car company.

He was proud that he'd been able to cinch the job.

According to him, not everyone is able to get a job there. Moreover, becoming a regular employee in it (benefits and all) has provided him and his family food on the table.

To him, this was the penultimate point of his career as a driver. He may or may not have had a vision of where he wanted to go. But at the peak of his career now, I can say that he's quite happy with what he is doing.

I've met people who are happy where they are now. They're not the CEO of the company. They're not even the head of their departments. They can be the secretary in the office, the clerk at the counter or the katiwala of the house.

Should one look down upon them?

All of us have our own goals. The success of our careers rest upon our desire and our drive. It also depends on our current stature in life. While some dream of becoming CEO's; others have simple dreams.

Even in simple goals, there are people who find happiness in it. And that's one determinant for a successul career - you are happy with what you are doing. It's an ongoing journey and it will take time.

It is also important to try something new. When you start exploring, it's when opportunities arise. Just make sure you know where you're headed.

Investmenployment Part II

2009-04-18T05:39:00.000-07:00

This is the follow up post to my earlier post on employment.

I purposely left hanging my earlier post with this last comment -

So Mr. Guerilla Investor, are you saying that a security guard, a janitor, or a driver should go to work to build a career? Don't they go to work for practical reasons?

In my almost 8 odd years of working, I have come to understand that initially, people work for practical reasons. Yes, you must work in order to live (unless you're sitting on a pile of cash), but when work becomes routine, when it becomes a requirement already, you get burnt out. And before you know it, you're writing your resignation letter for God knows what you created for a reason.

If you're a leader of others (i.e. a manager with staff under you), you have to be aware of the telltale signs that your staff is unmotivated or worse, on the verge of resignation. I've read and been coached that one sign is tardiness. The other is frequent absences. Of course, that's not the only sign you have to watch out for. You must get to the bottom of the subordinate's behavior.

Anyway, going back...

Lacking any factual evidence at this point, I will use empirical data instead, citing examples to establish my point.

The principle of being a career person is to have a goal. It's been said everywhere else and a lot of textbooks and career coaching books will tell you the same thing. Having a goal is an important tool for you to take a step ahead of the pack.

But I would add this point - at the core of having a goal is the word called driven. And with no pun intended, my first example is a rent a car driver I used to deal a lot with during my previous work.

More on it in the next post.

(I know I've been delayed two days since my scheduled post, forgiveness is not too much to ask right? ^^ Thanks for dropping by)

Investmenployment

2009-04-13T08:42:00.000-07:00

I didn't notice time flying by until I visited the blog and noticed that my last post was March 21. I was busy writing a couple of articles for some publications that at some point, my creative juices were drained dry. Apart from that is the fact that I also now have an 8-5 job.

My brain cells are in splinters and I realized that I haven't posted anything new in the recent past. This isn't my normal schedule (I post something new every Friday) but I think I owe you to post something brilliant... I hope.

Having an 8-5 job is a good thing. The mind needs to be constantly nurtured and sharpened, and there is none place better than at work. You are there to strategize, to solve problems and to seek alliances. The best part? You get paid to do that.

Not everyone feels that way. I'm no organizational behavior guru and I'm not here to preach about a new management philosophy. Instead, I'm here today to offer you the perspective that employment - just like the other E called entrepreneurship - is an investment.

There's this common thread among employees that go to work for a handful of reasons - pay the rent, for the children, etc etc. Work is the means to an end. While that is correct, people need to be educated and taught that while work is important, it is having a career that matters.

Sure, I speak like an idealistic fresh graduate. But too many times, I've noticed that people leave organizations because they entered looking for work, not to build their career. Although I've read elsewhere that people leave organizations because of their (problems with their) managers. I agree with that also.

So Mr. Guerilla Investor, are you saying that a security guard, a janitor, or a driver should go to work to build a career? Don't they go to work for practical reasons?

I'll share with you my insight this coming Friday.

Money Sense Article

2009-03-21T04:56:00.000-07:00

I was excited to post last night until I found out that we had not paid our internet provider the last two months, thus my Internet connection was cut.

Today, I'm just borrowing a computer just to be able to post. Therefore I'm just going to post something short. Actually, it's just an announcement.

I have an article coming out this March-April issue of MoneySense. Please buy a copy of it and let me know your thoughts. It's just a light topic regarding the wise use of mobile phones.

See you next Friday!

Here is the cover of the March-April issue.

March-April 2009
Weather-Proof Investment Strategies

Featuring:

Piolo Pascual Pays It Forward
For Richer or Poorer
2009 Consumer Trends
The 4-Way Test for VULs
Investing in Government Securities
Peso Bond Funds
And more!

Please visit: http://moneysense.com.ph/wordpress/

Buy and Hold a.k.a. Die if you haven't sold

2009-03-13T07:01:00.000-07:00

Recently, one of Guerilla Investing's sources of inspiration - Mr. Warren Buffett - has been hit by a series of setbacks. His company's stock has dropped 34% from last year. He is now the second richest man (not that that's a bad thing) due to a shrinkage of over 50% of his net worth - down to just $37 billion from $62 billion a year ago. His flagship company, Berkshire Hathaway has just lost its top credit rating from Fitch.

Another of our idol, Mr. Marc Faber, declared that the strategy being employed by Warren Buffett "is already dead, and has been dead for the past 10 years." I've attended one of the former's talks here in the country before but it's a tad difficult trying to understand his English due to his strong Swiss accent.

Anyway....

I am sure that the span of Warren's career has saw him going through some of the toughest financial climates post-Great Depression. And time and time again, he's been able to prove his critics wrong. The only question now is whether this will still hold true 5 or 10 years from now.

Certainly those who follow the buy and hold method have seen their wealth dwindle by 40-50% from their original investment values. Even our local mutual fund companies have suffered a great deal in terms of their NAVPS.

I guess instead of focusing on the buy and hold strategy, it's better to stick to the other philosophy that Warren Buffett preaches - that is, to diversify. There's also a mainstream thought that you shouldn't invest more than you can lose.

These simple reminders hopefully stick with us even when the bull run returns. Everything moves in cycles.

Have a happy weekend!

Guerilla Investing Will Be Back Next Week

2009-03-06T07:04:00.002-08:00

Thank you for coming by my blog site. I had dinner with friends who are also my former colleagues. I had a fun time but I don't have to share it in this blog :)

If you would like to read Guerilla Investing posts, just browse through the past articles below or you may look at the archives for great past articles.

See you next week! :)

How to make money in...

2009-02-27T05:14:00.000-08:00

Welcome to a new Guerilla Investing Series Special which will be a series of posts headlined by the title "How to make money in...". For the first in the series, we'll tackle the stock market.

I've written other series in the past and they include primers on investing, unique perspectives on conventional personal finance concepts, the purpose of having your personal mission statement, and of course my continuing take on the Waves of Philippine Business. The last one is still on hold as I'm further developing it.

So what about the stock market? I'm not going to teach you about technical analysis or fundamental analysis (Go to Absolute Traders instead!). I'm going to teach you how to make money consistently by sharing with you an approach that has proven successful for a selected elite group of stock traders.

I don't know them personally. I only got acquainted to their style of trading through my broker. If you are a fan of Robert Kiyosaki, he defines a stock broker as someone who is more broke than you. While that diatribe certainly will raise some eyebrows (especially of stock brokers), let's examine what my broker broke to me. I summarized them as such-

1. Have a Monogamous relationship with your Stock

He has a client who only buys one stock. Yes, just one. Regardless of whether the market is a Yogi Bear, a Red Bull or a Panda market, he only sticks to one stock. My broker would narrate to me how this client would call out of the blue and give a buy order for his (only) favorite stock. Whenever it came to selling time, this guy made a tidy profit.

This person didn't enjoy GEO like profits during the boom market (oh don't you miss the yesteryears of 2006 and 2007?) but he did enjoy profits CONSISTENTLY even during the bear market. Luck? More like excellent stock knowledge of his stock.

2. Have an experienced broker who has knowledge on Technical Analysis and Fundamental Analysis.

I'm no genius. I'll probably take a million years trying to absorb the rudiments of fundamental analysis. Moreover, a broker who is knowledgeable on Technical Analysis can give support to what you see (or maybe, perceived to see) in a selected stock if you pride yourself to be a technician. Since you have to have a broker (unless you trade online) to transact, then why not get his aid? A broker's duty is not just to do salestalk. He has to do a meaningful salestalk.

3. If you are in it for the long haul, learn to average down

The statement could be debatable but I think it is self explanatory. Just make sure you are buying a "good stock with fundamentals" like Ayala Corp., SM Prime, etc.

4. If you are in it for the short haul, learn to cut your losses.

Learn to internalize the catch phrase "don't catch a falling knife" and you'll soon realize that you have to call it quits when your trade goes awry.

5. If you want to feel a gain, you have to invest or trade big.

Usually 50K as a minimum would be a better start. So save up!

6. Timing Timing!

In real estate, location is everything. But redounded to its basic investment philosophy, timing is the more crucial factor, and this is most true for the stock market. Sure, you won't catch the absolute bottom or the absolute high, but if you have a bit of experience you'll know if you're early or worse, late into the investment.

Just look at the tell tale signs. For the stock market when IPOs are the norm, it means the market is about to peak. There were gajillions of IPOs in 2006 and 2007. Most of those that did an IPO in 2007 were flops.

If you follow rule number one and combine it with this rule, then you would know when your favorite stock is at its highest... or its lowest.

So that's it for now. Simple rules to remember. I hope you gained some new insights today. Come back for more and learn more about guerilla investing's guide to investments. =D

Guerilla Investing is..

2009-02-20T00:33:00.000-08:00

Feeling under the weather.

As such, he cannot think straight and would rather postpone his post until next week. Enjoy my older posts or just scroll down to my post last week.

See you soon!

Guerilla Investing's 2009 Predictions

2009-02-13T05:23:00.000-08:00

Time to go back to my usual Guerilla Investing blog routine...
>drum roll please<

In this week's post, allow me to wear my fortune teller's hat and give my bold predictions for the year ahead. Now before I start, allow me also to gloat (har har) about an article I wrote that wound up in the Business Mirror.

To sum it up, here was what I said,

"Your active source, be it business or employment, will not evaporate overnight. But the upcoming volatility in the financial markets, which will affect stocks and bonds (do not forget), is only a reminder to you that you should always live within your means. It is also a reminder that large gains from investments are an echo of this famous proverb, “If it sounds too good to be true, it probably is.” Stay safe. "

There's nothing sweeter and more irritating than to hear someone tell you, "I told you so."

Risking a spank to the face or a kick in the a--, I told you so! Haha. In fact, I am also saying that in front of the mirror.

Though I may have had it right with my prognosis last year; I did from time to time forget my own admonition.

It's just good I didn't get sucked in to the double-your-misery-in-five-years scheme. It's also good I am not American and did not entrust my entire life savings to Madoff. I'm also thankful that my preneed firm is still alive, "still" being the operative word here.

Killing Me Softly

You see, the term Filipino time is not used for naught. Progress and development in some sectors and current affairs of the country is slow. Take the public transportation for one. Take our country's competitiveness as another example. Further to that, take the effects of the global financial meltdown as another instance.

So far, our country has either weathered the storm quite well or we are just starting to feel the ill effects of Wall Street greed. No matter which side of the fence you are, uncertainty reigns supreme. And markets hate uncertainties. For this reason, investments this year, particularly paper investments would likely stay flat or decline even further.

If you are someone looking to invest, now is still a good time to invest, as was last year or the year before. Investing is always long term so ruin your eyes a bit and be a farsighted person. For those who invested last year and crying and ripping their hearts out (and maybe their financial "advisor's" also), remember that you didn't invest to make a quick buck. You can go over to the casino for that.

I'm also hearing a lot of people - including Dr. Doom and Jim Rogers - say that you should stay away from the US dollar. For someone who grew up seeing the dollar rise from the high 20s to the high 50s, it's something that's thought provoking, even mythical. So what does a poor fellow who has life insurance quoted in dollars? When he dies, does his beneficiaries get only peanuts?

Yes, the Philippines isn't as fast paced as most of the developed world, but being late also has its merits. Take this chaotic time to review all the assets you have with you. Are you well diversified or are you putting everything in just one basket?

Farming and Gold

During times of crises, the only things that are safe are basic commodities. Unfortunately for us, our slow paced development works to our disadvantage. For poor folks like you and me, it's hard to get our hands on investments in gold. The closest thing to that is jewelry, and it don't come cheap.

Your other option is to buy shares of companies that produce gold like Philex Mining. Apex Mining seems to be getting a lot of attention lately. I'm not saying that these are the stocks you must buy. A lot of "experts" (you see in the olden days, experts were often asked about stocks to buy, and most of them tanked last year, apart from being out of their jobs) tell people to buy defensive stocks - utilities and mining.

I prefer to take it a step further by asking you, the investor, this question. Are you looking at a potential rebound in the global economy. If yes, why are you being defensive? Why aren't you buying the other stocks that are dirt cheap?

Other than gold, food is another potential haven for you. We can do away with a new cellphone, but we cannot live without rice. Again, there aren't really investment avenues for us folks with regards to agriculture - unless you become a farmer.

Whichever investment you choose, it depends on what you see in your own crystall ball.

Something worse over the horizon

Critics and pundits are saying that the age of government control is back, with Newsweek bannering their recent issue with "We are all socialists now"on their cover.

Jim Rogers says that the stimulus plan won't work. Let me share you snippets of the article that came out in CNBC recently-

The recent shifts towards protectionism are harmful, Rogers warned.

"This is very dangerous, that's what caused the great depression in the 1930s. If it happens again, then you'd better sell all the stocks, you'd better sell a lot of everything and bunker down," he said.

"We already have a lot of social unrest developing. If protectionism comes back, you'd better be really, really careful," Rogers added.

Do you hear the drums of World War III?

Last thoughts

While I dream of electric sheep and hope one day of becoming an oft-quoted (expert) source, I just try my best to explain complicated financial planning concepts into digestible nuggets for now.

I'd love to be a consistent contributor to a personal finance column, but I guess some of the things I say are better off being published in a blog than in newspapers or magazines.

While there may be experts out there - hopefully not from Wall Street and ratings agencies - we have to dissect the information ourselves. After all it's our money we're risking.

The Unemployed

2009-02-06T04:27:00.000-08:00

I was watching the evening news and I caught an ABS-CBN clip showing a job fair. In view of the whole republic, the lady behind the desk asks a man,

"Okay lang ba sa inyo maging janitor?" (Do you want to work as a janitor?)

Tears slowly trickling down his eyes, the man weepingly replies, "Opo maam, basta lang matulungan ko ang nanay ko. May diabetes siya, wala kasi siyang pambili ng gamot."(Yes maam so that I can help my mother buy medicines for her diabetes.)

I find that so disconcerting that I still can't think straight about the Waves of Philippines Business I'm supposed to blog about. According to news, the country expects about 800,000 in LOST jobs this year. Let's make a tally of the reported losses to date -

FEDEX - 500 jobs cut
Intel - 1,800 jobs (It's a small small world, probably as small as the current job market. I recently found out that a friend's sister worked there, and she was one of those who lost their jobs)
Accenture - 500 jobs (I scoured the internet and found this from Yugatech.)

Anybody else who has their own tallies, please share. It is estimated that there will be 60,000 people who'll be out of work in the IT sector.

60,000 out of 800,000 is how many? 7 and a half percent. It makes you wonder where the other 92% of job cuts will be coming from. This coupled with the ominous return of displaced OFWs and people who have lost money to pyramiding rural banks and unscrupulous preneed firms make for a grim picture doesn't it? I can't help becoming a Yogi bearish person.

So amidst this, what can we do? What CAN we do?

I don't want to be like Dr. Doom, who today in CNBC proclaimed GE (the company that owns CNBC) and the United States as JUNK BONDS, live and within ear shot of those who watched the show this morning. He also states that the US could follow the Zimbabwean road, and that is 200% inflation rate. He isn't called Dr. Doom for nothing. Heh.

Manage your paycheck now. Control your spending. While it's good to spend (it boosts the economy), you don't want to overdo it. The next thing you will be holding might not be a paycheck but a pink slip. Stay safe.

Preneed in Need of Capital

2009-01-29T19:30:00.000-08:00

I wanted to go back to the Waves of Philippine Business but the recent wave of bad news convinced me otherwise. Preneed firms under water, export manufacturing companies shedding labor, and a cement plant temporarily shutting down. I fear that the effects of the global recession are yet to be fully felt in the Philippines.

The response of the Philippine government is to pass its responsibility to other countries. Note this sad fact -

"Job creation is tough in the Philippines, where some 27 million people live on a US dollar a day or less and where one in three adults are unemployed or underemployed, according to official data.

Jennifer Manalili, head of the labour department's Philippine Overseas Employment Administration, said that as a last resort Manila could export more of its work force."

That's been the solution of the Philippine Government for many administrations already. Instead of thinking of creative solutions to spur local small businesses to prosper, politicians are busy eating away at their pork barrel and praising OFW's as heroes to cover up for their own shortcomings. There has got to be a more concerted effort to spur small business lending.

There are plenty of reasons why there are more sari-sari stores than supermarkets or groceries in the country. There are also plenty reasons why carinderias stay carinderias for eternity here. I am sure that one reason is poor lending practices or just common place ignorance about what is available out there. This deserves a post by itself at a future date.

I attended the "Meeting of Major Business Organizations on the 2009 Economic Roadmap" (Yes, that is the title verbatim) held two weeks back. The takeaway there was that the government would set up a support fund for returning OFWs. We just don't know when this will be in place or how this will be distributed. Maybe they will provide information soon.

Apart from that, the government is banking on the BPO sector to absorb the expected job cuts coming from the manufacturing/export industries. The BPO sector is expected to continue to grow this year. I wonder if President Obama will push through with his "bring jobs back to America" call.

What was not indicated (nor expected I believe) was the recent closure of three preneed companies - Legacy Consolidated Plans, Scholarship Plan Philippines, and All Asia Plans Corp. Before that, Pacific Plans of the Yuchengco group (now owned by Noel Oñate) also faced similar problems. There is something wrong with the business model of preneed firms, particularly those dealing with education pension plans.

(To know Noel Oñate's background check this.)

I wonder if schools in the country ever experienced recession? If I remember my corporation law right, I know for a fact that schools are not charged any income tax. So if they are not paying higher taxes, what merits their annual hike in tuition fees? Hmmm...

While it may sound like an excuse to some, Mr. Oñate's assessment is equally true - "He cites that while tuition has gone up by 30-40%, purchased educational plans earn only 10%."

In fact, just ask yourself, where do you invest money your money? Savings, mutual funds, the stock market, bonds, property, insurance. Now, assess all of these -

Those that give guaranteed returns are at the low single digits.

Those like mutual funds and the stock market are volatile and market dependent.

Bonds are below inflation rate (especially vs. last year), and most of them do not give you compound interest benefits.

Properties on the other hand are cyclical and depend very much on location (don't listen to your real estate broker about property as the best investment) and pretty much the rest of what happens to the value of your property rests on the FUTURE. Something you don't have any hold over.

Insurance on the other hand has a big return on your premiums invested. However, it requires that the planholder die first. So who enjoys the benefit? Definitely not the planholder.

So you see, where can you invest your money in the Philippines? These are probably the same questions the management team of preneed companies ask themselves.

While much of the anger and fury has been directed at preneed firms, there should be even more levied on schools. Private education is one of the major expenses in a family's budget. If tuition rate hikes are in the double digit areas, do you think that on wages alone, you'll be able to send your children to school? I don't want to wake up one day and see my tuition bill rise to 500,000 per semester. You should wonder about that too.

Guerilla Investing is Back

2009-01-21T18:30:00.000-08:00

... After securing an internet connection one month after the last post.

I am using Sun Cellular's mobile broadband and I tell you, the monthly rate is quite a steal. So far, in my two weeks of using the service, it has been quite consistent. (Unlike their mobile phone service). If you already have an existing Sun Cellular line, you can avail of the service for just Ph 799 a month.

Before I go back to my usual guerilla posts, I'd like to blab about personal observations heh. O.o

These aren't trivial posts though, my ever observant and critical mind could not stop wandering and wondering about the real state of the economy. I used to say that the Philippine economy is a student economy. I forgot to mention that the country is also driven by the mall culture economy.

Last month I went to Robinsons Place Ermita and SM Manila due to the proximity from where I am based. Both were open until midnight on the occasions I went there. It was a pitiful sight. There were only scant shoppers and every shop had the "S" word. I wondered if it was because everyone was at the Mall of Asia or that the economy was that bad.

In any case, I am of the opinion that the mall business has reached saturation point. Apart from that, the growth rate of personal wages will fall behind the rate of expansion of malls. Malls are just snatching away customers from each other. The industry is much like the cellular network industry. While there may still be growth, each provider is just eating away at the share of the next competitor.

More than just wooing customers from the next competitor, each company is also at risk of cannibalizing its own market. Smart has Talk and Text. Globe has Touch Mobile. Their prepaid promotions (text all you can, etc) is used to flank Sun Cellular. Now, Red Mobile is attempting to eat a pie that's already saturated. When one company reports growth while another report losses, you know that the industry has reached saturation point.

Is the Philippines just one big saturated market?

Have you seen the distance between Banco De Oro branches? You should visit Binondo. Along Soler street, you will see not one, not two, but three Banco de Oro branches along the same street! This isn't the best example as some were recently converted Equitable Bank branches. Nonetheless, it makes you wonder if there is any room left for new players in local industries.

Going back to the malls, I wouldn't be surprised if malls compete with each other and decide to have parking rate promos or, better yet, waive parking fees on selected hours just to entice customers to visit their malls. SM alone already has 32 malls if I'm not mistaken. And like the relationship of Jollibee and McDonalds, a Robinsons mall is never far away from SM.

*****

Thank you for patiently waiting for a new post. When you come back here, you'll get more guerilla investing tips. Ciao!

Year Ender

2008-12-28T01:38:00.000-08:00

Hello Readers! Glad to have you back here.

I have been having troubles with my schedules this December because this blog writer is in the midst of something. I won't elaborate other than this might be the last post for 2008. I'll be able to post something new once more probably by next week or the first full week of January.

Again, I'd like to have a reprieve from my "Waves of Philippine Business". I'd like to review some of my 2008 forecasts and see if I got any right.

A few of my business predictions were wrong, notably my prediction of the revival of the semiconductor business (our exports sank). Who'd have thought that the US economy would be so bad?

A prediction I got correct was the launch of a new financial product. This happens to be the capital-protected insurance product being sold by AXA and Sun Life of Canada.

Another one I got correct was the Mining bust (look at the share price of Atlas Mining). And then there's my comment on the food business. Malls are packed with people, but most of them aren't buying stuffs... they're eating.

This year, there were two problems - crazy inflation and a lousy economy.

I would think that 2009 would be even worse. During the last quarter of 2008, more and more US companies signaled job cuts. The effects of the job cuts on their economy might be felt more by 2009 (if it hasn't yet already). So brace yourself for next year!

To give a ray of hope though, when everybody's so negative, it's the case that most company profit targets have been scaled down. The consequence of this is that if companies beat their forecasts, stock prices will soar. When stock prices soar, then your investments will also start recovering.

I'll give my fearless forecast for 2009 in my next post.

Before I bid adieu to 2008 though, I'd like to critique some of the forecasts made by investment bankers January of 2008.

The Peso will reach 38-40 by end - 2008 - DEBUNKED
The PHISIX will have a new high - DEBUNKED
NYMEX Crude prices will reach 200 a barrel - DEBUNKED

Investment bankers don't have crystal balls. If they had, most of them would have shifted careers prior to their company's closure.

In the end, it's the tried and tested simple investment rule that matters. In Guerilla Investing speak, we call it, "Have a SIS."

S - save
I - invest
S - simplify (your life)

Happy New Year!

Is Sanity Insured by the PDIC? Hmm...

2008-12-14T19:54:00.000-08:00

Guerilla Investing is back! Thank you for patiently waiting for my new post, dear reader. I'd like to take a break first from my posting on the waves of Philippine business.

While this piece of news had broken out last week, I think that it will remain a strong reminder for us in the present time... and in the future. I'm talking about a series of bank holidays declared by a number of rural banks.

And I don't mean holiday as some sort of national holiday. I'm referring to a holiday that refers to your money bidding you a (potentially) eternal holiday from your wallet/passbook. Depositors beware.

Last December 10, I read in the Inquirer that two rural banks - Philippine Countryside Rural Bank Inc. (PCRBI) and its sister company, Pilipino Rural Bank Inc. (PRBI) declared a bank holiday. The two banks are under the Legacy group (I wonder what legacy they want to leave the depositors, hmmm?). What's also worry-some is that the Bankgo Sentral ng Pilipinas found that the Legacy group also had a slew of undercapitalized banks namely -

Rural Bank of San Jose (Batangas) Inc.,
Rural Bank of Carmen (Cebu) Inc.,
Rural Bank of Calatagan (Batangas) Inc. (now Dynamic Rural Bank),
Rural Bank of DARBCI Inc.,
Rural Bank of Kananga (Leyte) Inc. (now First Interstate Rural Bank), and
Rural Bank of Bisayas Minglanilla (now Bank of East Asia)

According to the same news article, "the rural banks under the Legacy group have a capital deficiency of P2.5 billion that ranged from P1.4 million for Dynamic Bank to P983.5 million for the Rural Bank of Parañaque."

Okay, what's the punchline here?

Rural banks, at least from my experience, are the ones who offer double-your-money-in-five-years time deposit placements. But to just define it that way would obviously highlight my bias. Let's take a brief view of what the Philippine banking system looks like, based on how banks are classified -

Universal Banks
Commercial Banks
Thrift Banks
Rural Bank / Cooperatives

Primarily, the distinction among them are what they can do, how much capitalization is required, and what loan/deposit products they can sell. For more details, visit the online encyclopedia Wikipedia. Here's the link.

Using my Neanderthal internet skills, I could not find anything substantial about the banking system history in the BSP website. Maybe you'd have better luck?

As of December 13, 7 of the 10 banks under the Legacy group had already been placed under BSP receivership-

1. Philippine Countryside Rural Bank (PCRB) with branches in Mandaue City, Lapu-Lapu City and Liloan in Cebu,

2. Bank of East Asia based in Minglanilla, Cebu

3. First Interstate Bank in Tacloban City.

4. Rural Bank of Paranaque

5. Rural Bank of Bais in Negros Oriental

6. Pilipino Rural Bank (with branches in Mandaue and Argao in Cebu and Tagbilaran City in Bohol)

7. Rural Bank of San Jose in Batangas.

What is receivership? According to Investopedia, "A type of bankruptcy a company enters when a receiver is appointed by bankruptcy courts or creditors to run the company." In this case, the PDIC is the receiver.

The RBAP or the Rural Bankers Association of the Philippines issued a statement that amidst these problems were isolated and unique to few and that most rural banks “continue to outperform the entire Philippine Baking System.”

Okay. If you say so.

Why do I have a bit of sarcasm there?

Well, last May, a person came to me asking me if he should make a placement with Bank of Paranaque. He said that the bank was offering him 20% p.a., which meant that your money would be doubled in just five years. Naturally I was skeptical.

He said that the bank representative, who I am sure had this person's interests in mind (ho-hum) said, "If you want, just deposit 250,000 only. This is almost risk free as the PDIC insures your deposit up to that amount."

This guy also defended the rural bank since "hindi ito scam, kasi kasama siya sa RBAP." (This isn't a scam since the bank is a member of the RBAP.")

Go figure.

I hope he didn't commit to the investment since he didn't want conservative investments like pension or regular boring interest rates time deposits.

If you are in the same shoes as this person, and somebody is offering you a product like this, regardless of the institution, ask yourself this -

We are in the midst of a global recession. How and where will the institution get a return of 20% YEARLY?

Next question to ask yourself is, if Wall Street was able to put a triple A rating on subprime mortgage backed securities, what else is there that can't be manipulated? I smell a ticking time bomb in the local banking sector if some banks out there continue to sell their double your money in 5 years time deposit products.

What tips can I offer you? Check the t-bills rate. Check the performance of the real estate sector. Look at the stock market. Do you see offers of 20% yields?

Didn't think so.

Investing in the Time of Financial Cholera

2008-12-02T17:49:00.000-08:00

Since I won't be able to post anything original (again) this Friday, I thought maybe I'd share with new readers two of my previous posts that are worth your while. Both of these are mostly applicable only to the Philippine setting, but I'm sure they're good reads... modesty aside =p

The first is entitled "Investing in the Time of Financial Cholera". This is a post I wrote March of this year. Incidentally, this also came out in the Business Mirror. I used to contribute articles to the newspaper while I still had the time. It came out March 10 of this year. Reading it would give you a broad view of how I look at investments.

The Financial Cholera has already reached epic proportions with most markets down by a whopping 50% on average.

The second one is entitled, "White Lies Beneath". This is my article, which also came out in the Business Mirror, on investment scams.

Enjoy and hope to see you back here next week! :-)

Post-ponement

2008-11-26T08:51:00.001-08:00

My sincerest apologies but I might not be able to blog until after this week.

Please check back on my old posts on (my) analysis of the waves of Philippine Business.

There are lots of ways to look at it, so it's always up for debate.

If there is one thing though that needs to be done for the country to get to a more sustainable path of economic growth, it's to "pump-prime" the agricultural sector and to build better infrastructure like national highways, roads, bridges. When I say pump-prime, it shouldn't be a 10-year goal.

If we wait 10 years for all the projects to finish, no real benefits will be felt due to the burgeoning population. Population also needs to be controlled.

If we were to group countries in the world into just two groups, they would be the industrialized and non-industrialized countries. What sets them further apart is how one country was able to migrate from being an agriculture-based country to an industrialized nation. One interesting country though, is Brazil, which to my knowledge, is a net exporter of agricultural produce. I am sure that means pretty good GDP figures.

This is not to say that we shouldn't give incentives to sectors like power, utilities, and of course, the BPO sector. But with so much private investments particularly in the field of BPOs, I think the government should focus on giving more incentives to agriculture. Growth has to be decentralized from the NCR region.

I am of course, assuming that there are still available funds in the government to carry that out.

Thanks for dropping by once more. See you, dear readers, soon!

The Waves of Philippine Business P. 5

2008-11-18T05:41:00.000-08:00

Healthcare, the next wave

Last week I mentioned that the next wave for Philippine business could possibly be in the arena of healthcare. You may be wondering, healthcare? Didn't we just send off the last batch of graduating nurses abroad?

While the local healthcare system is certainly needing of more nurses, it makes sense - at least to me - that this is the plausible next wave for business opportunities. One must remember that healthcare is a very very broad word that carries with it a lot of sub-industries. Which is why it's worth noting them down.

Let me name them -

Health Insurance
Health Products
Health (ier) Foods
Hospital Care
Nursing Home
Cheaper Medicines
Medicinal Alternatives

In fact, healthcare may also encompass other industries like dermatology clinics and the booming wellness clinics like spas. With that in mind though, it seems that I am again, behind the curve.

Better Late than Never

Yet, sometimes being behind the curve has its benefits. If you're the pioneer in a certain industry, you almost always have bigger challenges to surmount. This means then, that you also have to have more capital and tons more amounts of perseverance, to survive. Of course, the flipside is that the returns are much higher. The reason is that you have to teach your target market and to acquaint them, and to convince them that they need your product / service.

This brings to mind Smart Money. Smart Money was launched sometime in the earlier part of this century, and to my knowledge, it flunked. This year, they relaunched the product with heavy TV advertising. I wonder if it's made inroads already into the psyche of Filipino consumers. I think that mobile commerce is a lucrative business (more on this in a future post), but right now, the market is still small.

The critical base - the masa crowd, believe it or not, are important in sustaining any business. Consumer goods companies need them to survive. SM needs them to survive. Tutuban and 168 Mall needs them to survive. Since a majority still dont have access to Internet in their homes, it will take more time for mobile commerce companies to really fly in this country.

The other market for mobile commerce - the middle class market - would be a good target market. But in my opinion, I think they are just not ready yet for mobile commerce. Besides, the supposedly cheaper prices of Internet cannot match the vastness of the catalogue (and of course price) of products found in Divisoria. People still brave the horrendous traffic and pickpocketers just to find a good bargain. Moreover, you can't try on a shirt or a pair of shoes on the net now can you?

What am I trying to drive at here?

While using Smart Money alone as an example is not a good indicator, I am relying here on pure gut feel. A gut feel that tells me that being the first isn't always the brightest idea. Especially for an SME entrepreneur.

As you can see, being the first may have its advantages; however, it also brings with it a confounding set of problems. Being behind the curve, albeit not too behind, will allow you to cash in on a certain market without having to put up an insane amount of capital.

Business Cycle

Business will always come in cycles, no matter what an optimistic economist may say otherwise. The current housing problem in the United States is nothing extraordinary, you can't keep on buying houses. There's got to be a plateau at a certain stage. It's what businesses do during the plateau stage that ensures its survival.

The business cycle usually comes in four stages. The infancy stage, the growth stage, the maturity stage and the decline stage. The length of time per stage depends on business to business, industry to industry. Apart from that, you have to know also if there is a decline stage at all for a particular industry.

So far, the telecoms industry is in a prolonged maturity stage. I doubt that there'd be a decline stage in the foreseeable future. People need to communicate. The decline stage though, will come for a particular type of technology. Like how pagers were wiped out from the face of the earth with the entry of the more compact mobile phone.

More in my next enry. Thanks for dropping by!

** I'm posting later than Friday, for that I apologize. I'm busy doing something right now and I have to prioritize them over my blogging. Thanks for dropping by :-)

The Waves of Philippine Business P. 4

2008-11-10T08:49:00.000-08:00

OFW Remittances Revisited

No one should belittle the impact OFWs have made for the country. Obviously, having a lot of OFWs also signifies that there is an underlying fundamental problem within the country. Nonetheless, they are and will continue to be the driving force for the local economy.

I discussed about how - knowingly or unknowingly - we have moved up the value chain in terms of talent exports, by sending engineers, interior designers, and recently, nurses.

I would like to explore how OFW remittances have also moved up the higher value spending chain.

It used to be that remittances brought back home would go to necessities - food and clothing. The first high value product were the household appliances, foremost of that was the TV. I was blessed to have travelled abroad while I was still young. I distinctly remember a lot of our compatriots sending back TV sets. While waiting for your baggage at the luggage counter, you'd see a lot of them being ferried out.

Fast forward to the present and now OFW remittances are being used to pay for college education, automobiles, and until recently cart franchises and real estate. As I've said in the second part of this series, an important charting tool to forecast what the next Philippine business wave will be is to understand where and what OFW remittances are being spent on.

However, you don't always need to have the latest data for you to know the answer. You just have to be more perceptive of your surrounding. Take for instance the franchising industry in the country. The franchising business in the country is said to be worth an estimated 15 percent of the annual (Philippine) retail sales of roughly $5 billion. Where did the money come from to fuel enormous growth rates for the franchising industry? Why the OFW remittances of course.

Even though most of our overseas Filipinos have established their lives offshore, I don't doubt that when they are near retiring age, they will return to their homeland. But since they know the value of hard earned money, they don't want to come back here empty handed.

It is for this reason that they have setup a business for their children (or for themselves). That way, they'd still have a source of livelihood once they are here. Some OFWs don't wait until retirement age to come back. These people build up their capital and come back here to put up their SME's.

If business does not suit their tastes, then a roof above their heads is something that holds mass appeal. OFW remittances, proving their economic clout once again, fueled the growth of the local real estate sector. With the burdgeoning supply though, it remains to be seen if this sector will continue to post record gains. Demand has to plateau and it will take a number of years before demand catches up with supply. I touched lightly on the property sector a few posts back.

In tracking the progress of OFW remittances, I project that the next wave of growth would be in the arena of investments. This won't necessarily translate into instant huge volumes in the local stock market though, chap. But the remittances have found their way into the subscription of retail investments like mutual funds and unit investment trust funds.

In fact, I am behind the curve already. Based from the SEC, in the year 2000, our mutual fund industry was already valued at US$ 161M.

These three - business, real estate and investments - are where the money is and will be. Among the three, business, particularly SME's will continue to thrive as opposed to real estate and investments. Cohesively, all three are considered investments anyway. Investments don't just mean mutual funds and stocks and bonds. They also mean putting money in real estate or a going concern. Since we have been in this Investment Wave for quite some time already, probably 3-5 years, growth won't be as insane as in years past. So it's important to extend our lenses even further.

In my bold attempt at trying to be a pseudo business guru, I think the next logical wave would be in the area of healthcare. I'll talk about that in my next entry.

The Waves of Philippine Business P. 3

2008-10-31T10:41:00.000-07:00

I mentioned in the first part of this series, that hindsight is 20/20, and foresight is ensuring you still have 20/20. It's about being prepared for the future. It is a bold attempt for me to be discussing about the waves of Philippine business. I'm no business guru. I just have a penchant for observation and deep thought. Quiet dissertation, so to speak.

I mentioned also that the biggest and most important indicator are OFW Remittances. This is the single most crucial factor that drives the Philippine Economy. Sure consumption is equally important. But to put things in perspective - if we are to illustrate it - the Philippine Economy is like a jeepney.

Consumption is the jeepney driver, OFW remittances are the passengers. The more passengers the jeepney driver has, the bigger his consumption power is. When he sees a lot of prospective passengers on the street, he'll drive the jeepney faster to finish his first trip and go right back to picking the next batch of passengers on his second trip. The Philippine Economy explained.

OFW remittances are the sole reason why the Philippine economy continues to exist. That's why even with high corruption level, bad business practices, rising poverty level, and dwindling natural resources, we aren't going under anytime soon. Obviously, all of these negative factors will catch up with the country one day, but when? The answer is up in the air.

I quoted John Gokonwei earlier, mentioning that we are a country that consumes everything, and produces nothing. Reading between the lines, it means that we have a low manufacturing base in the country. This is beacause most have migrated to investor-friendly China in the past few years. Apart from that, the lack of labor unions in that country allow foreign companies to scrimp on wages.

Even if we don't have a diverse set of manufacturing plants in the country, we still export our number one produce - human talent. However, unlike plants that manufacture goods in just a number of days or weeks or months, ours take years. It takes 20 years to send off able workers. Anyone younger than that would be considered illegal.

Since population is a growing resource for us, there are many who have gone abroad already. There is just so many Filipinos in that age range. So in understanding OFW remittances and OFW exports, we have to know, how many productive individuals are in that age range? And the next important question is, when will the existing ones retire? When they retire, do they plan to come back?

You can see where question leads to, but let's skip that for the moment.

As I've mentioned, even though we don't have a lot of manufacturers here, we are still exporters by my definition. Exporters of labor. But what have you been noticing? We don't just export DH (domestic helpers) anymore, we now export healthcare professionals, apart from engineers or IT professionals.

And this is something that is interesting to talk about. It's basically a hindsight analysis. In most manufacturing countries, they must go up the value chain to survive. China won't survive by just producing cheap garments. They must venture also into technology.

In the same way, our labor exports have gone up the value chain - by producing nurses. And like high value goods, our high value professionals produce/remit more dollars back home, thus driving our economy even more. With growing competition from Indonesia of domestic helpers, (at least in Hong Kong) it's interesting to note that we have shifted our human exports to a different industry.

It is in these analyses that will spring forth a slew of ideas. We'll discuss more in my next entry. Happy Halloween!

Commodities Hunting

2008-10-23T23:11:00.001-07:00

Welcome back! I would like to take a break from the series of blog entries I'm writing. It's about my perception of Philippine business as well as my (attempts at) prophesying what would be the next wave of Philippine business down the road. For the first two I've posted -

For my first post please visit here - Part I.
For my second post in the entire series - Part II.

This year was touted as the start of the mining boom for the country. However, as you can see, it's been anything but. Red tape, local tribal protests, and more importantly - the global credit crunch, has probably crimped any remaining hopes of big ticket mining investments - at least in the near term. So far, commodity prices have also been hammered along with the stock market.

Oil, one of the most traded commodities, was for a time at a high of $155 a barrel and has now plunged to half of that. Experts call it economic slowdown. Pundits call it speculation. Critics call it manipulation. Pinoys call for a price rollback.

A friend and I were discussing about our sentiments for 2009, and while I was admittedly bearish, he was seeing the glass half full. I told him about the possible breakdown of financial institutions, including the local ones. He said that while worldwide, we are indeed in a crisis, he said that it isn't the end of the world yet. If the crisis is as bad as it is being pronounced by media, then we would already be at war right now. That was his two cents.

And two cents mind you, is the worth of OV...well actually less. The stock certificate is probably more expensive than the share price. That's the time you think that the current stock market values are preposterous. I guess this is also the time you call a market bottom - when the costs associated to the production of stock certificates is more than the value of its stock price.

OV, along with OPM, PERC is a classic case of how the Philippine stock market works. The Galoc oil field has been producing oil, although they have not yet been put to commercial use. Apart from that, a nearby site has been discovered to have oil as well. I'm not sure if it's this one. So on paper, there seems to be something positive about these oil companies. Yet, these stocks are in the doldrums. Go figure.

(Yeah, I know it's also attributable to the credit crisis. Blame everything on the credit crisis. But I think what is more important is to know who were the people behind the curtains called "credit crisis".)

This also makes you think that maybe, the stock market is just one big playground for speculators. Obviously, when the there is a bear market, speculators are not in the game. When everything starts turning bullish again, they come back right in, fueling the "growth of the stock market", or "creating wealth", etc. I'd imagine that if this were a bull market, OV's share price would be skyrocketing to the moon.

So is the bottom near? Are we in the capitulation stage? I believe that more likely, we're in the kaput-ulation stage.

What about commodities? Are they the way to go for your money? Older generations of Chinese-Filipinos would always say, put your money in property and gold. Although it sounds like sage advice, it lacks one important element - and that is the timing.

When do you buy? How long do you hold on to it?

Another friend and I were talking about gold, and he asked if it would be alright to shift his money to gold. I asked him one simple question - how are you going to liquidate it in the future?

Yes, it is possible for you to buy gold, but the problem arises when you need to dispose of it. Apart from the fact that it's hard to sell it, it's also hard to find someone who is selling genuine gold bars. Then, even if you find someone who is selling gold, do you know how much money you need to buy?

Doing a layman's computation and analysis, let's examine -

Based on Kitco, one ounce of gold is at $700, more or less. To make it easier for you to understand just how expensive it is to buy gold, let's use a Coca-Cola 8oz bottle. If that 8oz bottle was filled with gold, then you would have -

8 x 700 = $5,600 due to the seller

But since we're in the Philippines, let's multiply that with the latest Peso-Dollar exchange rate of 48.51 then you have -

Php 271,656 for one 8oz of Coke.. er gold.

Still want to buy gold? I think the more prudent approach is to buy gold jewelry. They won't be worth as much as the gold bars, but, in the event of a cataclysmic event like a world war as a result of the financial turmoil, even jewelry can be used as barter for goods. Your property will be worth nil as it will probably be seized by the occupying forces of a military organization.

The Waves of Philippine Business P. 2

2008-10-21T06:59:00.000-07:00

Prelude

Hello regular readers, apologies for taking such a long time to update my entry. I was looking at the share price of Megaworld and I guess it took me some days to recover.

I saw the high of this stock last year when it peaked at around 4.00 or higher. Lo and behold, it's now below 0.95 thereabouts. This is near the lows of its share price during the height of the Asian Financial Crisis.

Now, let me ask you, is Megaworld on the brink of Armageddon? Probably not. Do I see value? Well, on paper there seems to be. I haven't checked their FS; but, based from my experience companies here aren't as transparent as say, US companies anyway. On a topline view though I think they are still booking new sales albeit at a much slower pace than before. But to see its price fall below 1.00? That's just too much.

Back to the Waves

I mentioned during my last post that I'd be discussing the waves of Philippine businesses. Let's proceed to that.

To discuss the waves, you need to have a slew of indicators. These indicators are much like what economists use to gauge where the Philippine economy is headed. These are also indicators that the Bangko Sentral (BSP) (Central Bank) uses to determine if they should do expansionary or restrictive economic measures like adjusting the interest rates. For our purposes though, we will use other forms of factors.

Remember the theme of this blog, it's guerilla investing. Therefore we (or I) don't use the usual indicators used by most economists. We (I) have to approach a problem guerilla style. And that's what we (I) are (am) doing. I hope this third person / first person perspective isn't putting you off. I mean I'm just one writer, but I also have to take into account that the reader here is also interested in the guerilla approach to finances, hence "we".

I haven't battle-tested these indicators, so at this stage of my investing philosophy, they are a work-in-progress suggestion. What does this mean? This means that at this point in time, I cannot safely state that these indicators are good indicators. But as you read along, I am sure that these indicators will make sense to you. Some are the usual indicators, some are not. Some are accessible to the public , some are not.

The Guerilla Indicators

If there is one important indicator, it's this - OFW Remittances. But beyond the number of zeroes you see attached to the $ sign, it's important to dig down the figures. Dig what? For gold? No. Dig the data, where does the money go to? OFW remittances fuel our consumer driven economy, as John Gokongwei puts it, "We are a nation that produces nothing and consumes everything." (Well except for babies, which we produce in great quantities. Haha).

As far as I know, there's only a few studies as to where the OFW remittances go. I'll try to search for them soon.

What other indicators are important?

Media - what's the headlines now? I've realized that a huge chunk of the perception people have here are based on what they see or hear from the news. What are the themes in most magazines now? Magazines are also a good source of information and trends. Who'd think that magazines dealing with gadgets and home decors and condos would fly?

Now, look at the malls, don't you see gajillion outlets selling techie stuff? There're Apple stores now, laptops have become cheaper, Motorola/Ericsson/Nokia boutique shops. Which came first? The magazines or the products? It's hard to tell, but certainly, magazines and media are an indicator for you.

Car sales. It's one of the figures that are hard to fake. This is a subject (cars) that I will tackle in detail in a future post. Check the top 5 brands/models that are being sold. Check the growth rate if it's published in the news. Chances are, if there is growth, then the economy isn't doing as bad as the stock market is telling you.

Number of students in private schools. I am not sure if this is easily accessible, but this is an important indicator for you. We all know how expensive education is locally, so if there are still scores of students enrolling at exclusive schools, then you know that there is something wrong with the low GDP numbers.

We'll talk more on my subsequent post. Thanks for dropping by and being patient. Hope you enjoyed the read!

The Waves of Philippine Business P. 1

2008-10-13T07:29:00.000-07:00

I know I know, there I go again, passing up my blogging schedule. I've ran out of reasons, (they're real by the way), but on with the new entry. I said two weeks ago that I would talk about the next wave of Philippine business. Yup, it's my attempt at being Alvin Toffler-like. I haven't read past the cover page of his book/s; but, seeing how his books are still being sold today, it probably has some really good stuff inside.

Too often, the cliche that you must look to the past to know the future is mentioned whenever a person is to talk of what he thinks about the future. I find that I also have the temptation to do that. But instead of using that cliche, I'm going to use another one - "Hindsight is 20/20."

And indeed, the looking back and understanding the past is 20/20.

I was idling by one day, thinking of how things have changed over the years, and how many business opportunities were lost along the way. Not one to have much time on his hands, I guess I shelved the though for a while and went on to my other tasks. However, my brain is never in a state of inertia. Even when I am doing something, thoughts just keep popping up in my head, and this thought I guess was one of those I couldn't ignore. It was the thought of the waves of Philippine business.

I'd like to caution you that I'm not born nor academically trained to be an economist. I just have a penchant for observation and "quiet dissertation". Quiet dissertation is my own term for the times when you present your hypothesis in your mind, then you argue the points and the cons of that hypothesis, but only in your mind.

Right now, these hypothetically called "waves" have no general theme yet. They're all just a bunch of ideas that need collation. At any rate though, I'd discuss them one by one albeit with less flow and consistency in theme. I hope that they will be an interesting read for you and that they will conjure up business ideas for you as well.

Come back for my next entry as we journey together and (valiantly attempt to) discuss what I think business was before to what business will be down the Philippine road. I always love to say, if hindsight is 20/20, then foresight is ensuring you still have 20/20.

Remember, as much as Guerilla Investing is about investments, starting and doing any form of business is also an investment. And unlike other investments, a business requires more than just an investment of money or capital. It requires an investment of time, brains, and will power. But as history (again, the past!) will show, succeeding in business have made for people more money than investments.

Until the next entry, do investing the Guerilla Investing way! I've got investing tips, tricks and new gimmicks in the coming months. I've been blogging for more than a year already and I think it's really time to migrate to something bigger. Ciao for now! =D

The Thermometer of the Global Economy - Stock Markets

2008-10-06T06:46:00.000-07:00

Personal random thoughts -

Sorry folks, I've been delayed by not a few days from my scheduled posting date. Been rather busy and had to prioritize them over my blog... unfortunately.

I did, however, before this respite of time, manage to write a piece of fiction, just to rescue my sanity.

I've also added a new search feature to this site care of Google. Do tell me if it's useful or it needs more tweaking.

Important Philippine business news -

AIG plans to sell its Philippine unit Philamlife

Philippine Stock Market UP (yes, you read that right) for the third quarter unlike other Southeast Asian bourses. (Sorry no link, I just saw it on CNBC last week). Strength? Looks like it.

HK Securities, a local stockbrokerage despite its name, is going to be taken over by the PSE

On to our blog entry -

Stock markets worldwide plummet because of growing recession fears

As I am blogging, the DOW is down by triple digits, and and has fallen the 10,000 mark. The passing of the bailout package has become a classic case of sell on news for traders. I guess passing it was just to delay the inevitable path of the DOW to 8000.

I can only imagine the bloodshed in tomorrow's local market. (Shaking my head). This has been a tough year for people trading the stock market. The stock market is no longer a barometer. It's now a thermometer. It's a thermometer for sick stock traders, economists, investors and every other individual. All of whom are clueless and helpless... sick from the avalanche of negative news.

The thermometer has yet to reach typhoid fever levels, but with banks falling like dominoes, there is a lingering question, who's next? Stock markets, and obviously even us regular folks, don't like uncertainty. Until all these bad news are accounted for, we'll be seeing a sea of red for the weeks ahead.

The things to look out for right now are if other businesses are also affected. Right now, bulk of the problems everywhere are in the financial sector. The problem is when banks start folding up, businesses will have difficulty accessing credit to fund their expansion. This simple concept is packaged in a term called credit squeeze.

Right now, I don't and can't offer any piece of positive news. Hold on to your butts and cash. And if you're brave enough, you can still put money into INVESTING. Those who made the right investments during the fallout of the Asian financial crisis are happy now. Who knows, these crazy and panicky times could provide an ample opportunity for the shrewd investor out there.

I'm not recommending any Philippine stock though. Not yet anyways. But there is one thing I might suggest. And that is gold.

The Philippine Economy in a Nutshell

2008-09-28T09:23:00.000-07:00

Hello readers, I'm back - not from outer space - but from hectic work. As of 1229AM September 29 Manila time, the US bailout package is still being worked on. Since there's been and there'll be lots of news coverage about it, I won't talk about it anymore.

The first Ber month is about to come to an end, and we're opening the window to the usually festive and ultra consumerism period of the 4th quarter. It's been quite a year so far, both for the investing world and my personal world. I wonder if there'll be some respite and good news, again both for the investing world and my own.

I've been visiting SM Manila for quite a number of times recently and I am just amazed at the number of foot traffic it has - even on weekdays. A majority of those are students. Not surprising considering that there are many colleges within the vicinity of the mall.

That observation made me recall what a friend of mine (a Finance grad) once told me. He told me that the Philippines is basically just a student economy. Business is bad during the summer break, then it picks up when children and young adults hit the schools once more. That's open for debate, but if you think about it, it is a good point.

I don't have specific data on what students spend on these days. Years before though, I was able to encounter a research on where they used their money on. The problem with that piece of research was that it was centered only on drinks and snacks. So it did not show the complete pie of student allowance, but a portion of it. The research sought to pinpoint what brands students bought for their snacks given their limited budgets.

I am also unaware how much is given to children as allowance these days. I remember that when I was still a young boy, I would get about 5.00 or 10.00 a day. (not a week, I'm not that old! haha). But that wasn't everyday as my parents wanted to control how much money I was getting.

Teaching kids about money is an important value that parents most often forget. I think I should talk about that in the future. Going back, I wondered about my friend's comment. He probably based his conclusion on a microcosm of the Nursing students population. The population particularly surrounding the area of Metropolitan Hospital in Sta Cruz Manila.

During the years after 1997, the vicinity of the hospital was a dead area. Even though there were a lots of private schools there, when students are dismissed from classes everyone immediately goes home. 10 years after, the place is alive with students in white uniform - Nursing students. Old commercial areas were renovated into food kiosks and stalls. There was a mini-economy that was created in the area. All because Metropolitan Hospital introduced a Nursing course.

I am amazed by how the wheels of economy work. Money and wealth were created in that area. This was all because of that course offering by the hospital. I just wonder, where did the parents supporting these students with tuition money and allowance, originally spend their money on? The growth in the money supply of the area may have also been spurred by the exponential growth of the OFW remittances. It's definitely the case that not one answer can suffice.

If you want to do business, it's these kinds of opportunities that you must seize. In a future post, I'll talk about investing in the next business wave of the Philippines. Sort of like an Alvin Toffler type of forecasting. But mine is more based upon observation and tons of hindsight. I don't have the benefit of tons of research to make a scientific prediction.

Ciao for now.

**** I guess I have to go back to the bailout issue. My source of inspiration - Warren Buffett, said to the US Congress: Bail out economy or face 'meltdown'.

Three Rules of Thumb for Investing

2008-09-24T08:58:00.000-07:00

My blog entry was supposed to have come out last Friday, as this is my scheduled updating day. Unfortunately, things came up once again, and moi wasn't able to update anything up until today.
While the financial fallout continues to be in the headlines (this yahoo link keeps on updating its headline) and Ben Bernanke warning that it could spill over to the US economy (hasn't it already?), what can us small investors do?

I read one local site's take on the issue, which I like. And I've got my four syllables for everyone -

DI-VER-SI-FY

Everyone, including this blogger, has forgotten the golden rule in investing. To joke about it, you'd be in better shape if you had investments in both Merrill Lynch and Lehman Brothers, than solely in just Lehman yes?

I've got another four syllable advice for you

TIME HO-RI-ZON

Oftentimes, we forget that investments take time to grow. Fast money? More like fast money down the drain.

People always follow the herd, and the last person to follow it usually ends up buying at the most expensive, at the highest peak of the asset's price. I always wonder how the poor guy feels now when he bought stocks in 2007. Herd followers most often make the poorest of decisions, oftentimes forgetting that when he bought the stock (or whatever asset for that matter), it wasn't supposed to be just for an overnight duration.

I am speaking from experience here. So learn from it.

Lastly, another golden rule is this 4+1 syllabic word, and that is

E-MER-GEN-CY FUND

Don't be enamored by the (attach noun here like real estate, insurance, stock, what have you) broker. I once posted an entry about it. Why do I say so?

One of the magical one liners these brokers use is this -

"Buying (my product) is also a (savings tool, investment, etc)"

This is true. But somewhere along the sales pitch, this person forgot that the prospect's salary goes to pay for his / her rent, food expense, utilities expense, perhaps his other mortgage, etc. That is why folks, in the off chance that you get suckered into deal by a sweet talking agent, it's best to have an emergency fund tucked into your investment portfolio. You never know when rainy days - or financial meltdowns - will come along.

Fall From Grace: The Horror Story of Banks

2008-09-12T11:22:00.000-07:00

BREAKING NEWS - Lehman declares bankruptcy, Merrill Lynch sold, AIG in trouble

This has been a dull week for the local stock market. The rescue of Fannie Mae and Freddie Mac spurred a lot of kneejerk buying in many markets just this Monday but failed to entice our own. In fact we closed down from last Friday's close. It signaled what would be the performance for the market this week, boring - dismal - disappointing.

Overheard at the exchange: "This is better than counting sheep!"
(Photo Courtesy of BusinessWorld)

It's been one year already into the so called subprime crisis and US banks have been falling like dominoes ever since. All the big US banks - Citibank, Merril Lynch, Bear Stearns, Lehman Brothers, AIG - (apart from others) have seen their share prices fall off a cliff. Although I live thousands of miles away from the US, and am by no means an expert on the banking sector, (most especially that country's), it lends me to ask one simple question,

Should I entrust my money to a bank?

When I watch CNBC, and I hear all the commentaries from stock brokers, analysts, and research reports from the Citibanks, Merril Lynches, etc of the world, advising you to buy this (stock) sell this (stuck), I wonder, should I still be listening to these guys? It strikes me as quite odd when the big banks that have "asset management services", "investment advisory services" are now the ones in need of asset management and investment advisory advice. It is pure irony.

If I entrust my money to an institution that supposedly gives me the opportunity to grow my wealth, and then it severely disappoints by eventually wiping out my entire capital, wouldn't it be better for me to just hold on to cold, hard cash instead? The question that begs to be asked is,

What do banks do with your money?

Locally, I think our banks have low levels of exposure to US subprime securities. That is good. But with service that sucks, sometimes I wonder to myself if I should just put my money into a going concern instead. At the end of the day, banks may have a good business purpose for you, but it's the oldest tool of using OPM (other people's money). This could explain why our taipans almost always have their own banks. It could have been a spring board for them to wealth accumulation.

Lucio Tan - Allied Bank & PNB
Henry Sy - BDO
John Gokongwei - Robinsons Bank
George Ty - Metrobank & PSBank

The ongoing turmoil in the US financial sector should open the eyes of the banking consumer to be more vigilant about where their money goes to. Lehman Brothers is the new casualty in the financial turmoil, and people still don't know if there will be others who may follow the road to financial RIP.

I think the next time I enter a bank and some bank personnel talks to me about "investment advisory", "asset management", I'll just smile and say "No. Thank you."

I know where my assets should go, it's just that I do not have the time to do it on my own. The ones who are supposed to do that on your behalf are banks and investment institutions. But if financial institutions can't be trusted, who then can I trust? Maybe I should just forgo taking risks with investment placements and instead, place a time deposit and watch my money die due to inflation. At least, the principal does not die with the interest "gains".

Giving Credit to Credit Cards

2008-09-06T18:54:00.001-07:00

I feel bad whenever I miss my posting date. My excuse for this week is that I was out with friends for a birthday celebration (not mine) Friday night. Before I left the house, I caught an interesting news item on our use of credit cards. Due to the hard times Filipinos are turning to credit cards for their money needs.

Instead of waiting for the paycheck, many are using credit cards to buy basic necessities. Apart from impatience with paychecks, the higher costs of virtually everything eats up a big chunk of the previous paycheck. We all have to live, and armed with a credit card, one can buy groceries ahead of their expected pay date.

This is just a mundane benefit of using a credit card, but it's an insight credit card companies can use. Marketers have drummed up every possible avenue to entice people to get a card. They can be points, miles, free cellphone for a new card, etc. Most of the times, people use cards for unnecessary purchases, fueled by the magic number of "0" percent interest rate. But using cards ahead of their pay dates for basic necessities? That's something unique.

While there will be peculiarities with the shopping habits of a Filipino, depending on his social class, I am pretty sure that the time will come when credit cards eradicate the informal lending sector (I hear 5-6). One day, even mid-sized stores outside of malls might start accepting credit cards.

Ever wonder about a scenario where auto shops in Banawe or furniture shops in Binondo start accepting credit cards? What about shopping in Divisoria using credit card? You can shop like crazy and you won't even have to bring loads of cash (and fear thieves) to do your shopping. That would be something right?

According to the Bangko Sentral (Central Bank), credit card receivables are up 19.7% from last year. As our country progresses (yes, we are), so does its capital market, albeit at a slowed pace.

Like I said in my previous post, we are going to see developments where we can save more, invest longer, and retire comfortably. Personal finance is now more pervasive in media, particularly on the Internet. These are developments people take for granted, especially the younger ones who will now grow up in a Philippines with many avenues for them to save and grow their money. And with credit cards becoming more and more of a necessity, younger Filipinos grow up in a world with 12 months 0% interest shopping and purchases.

I hope that the next landmark legislation for the country would be the establishment of a more transparent and fixed system of tracking credit history. I've read horror stories about individuals being chased by credit card companies, individuals being blacklisted from loans unilaterally, etc. It's something to look forward to, and hopefully we won't have to wait another 10 years (like the PERA bill) for it to pass as law.

For now, credit history is vague. We don't have a FICO score like Americans do. Locally, using credit cards, according to most news articles I have read, is your one best weapon to build up a good credit history. A good credit standing will allow you to faster processing of your loan applications - whether it's for business or personal needs (housing, car, etc.)

The PERA Bill (Additional Information)

2008-08-30T09:07:00.000-07:00

Well I'll be... My computer was down the past four days, I'm updating my blog from another place just to make up for my delayed post. As I said in my other blog, my computer failed me this week, so I couldn't post a darn thing here and there.

After I posted my entry last week on the PERA bill, I found out some more information about the landmark bill from the local daily.

* The PERA Bill is also considered a retirement bill
* Primarily for people who don't have existing pension funds (like SSS or GSIS). This means this is primarily targeted at OFWs
* Republic Act 9505
* Non OFWs - 100K, OFWs - 200K annual limit (for married couples, just multiply by 2)
* Employers will have tax advantages if they have a PERA account for employees (unclear but based from this newspaper (Philippine Star, August 23, 2008 page 10), it can be as much as the maximum allowable contribution of the individual, i.e. 100K. This will be on top of the mandatory SSS and retirement pay under the Labor Code. Everybody happy right?
* The BSP will screen the administrator (the PERA fund manager) while the BIR will accredit them.

Stay tuned to here (and of course the news) for more details.

Congratulations Senator Angara. Let's hope existing mutual funds, UITFs, and the stock market will be allowed as PERA accounts. This will certainly develop the Philippine capital markets, especially with the plan to increase the trading hours of the local exchange. Interesting times indeed. I just hope people use these capital market advances to their advantage. These are things people should be aware of.

The PERA Bill

2008-08-23T00:05:00.000-07:00

Yesterday, I was late to my post, that is why it's coming out today. Yesterday was also the day PGMA signed the PERA bill into law. I've been hearing about the law since last year I think, but upon reading up on news, I realized that it took a decade to become law! Legislation takes that long, I suppose. I mean there are developments and progress in the country, it just does so snail pace.

Notwithstanding your inclinations and opinions about Philippine politics, this is certainly something to celebrate. I'm similar to you, just as excited but just as clueless. Information about the bill will slowly trickle in to popular media.

The implementing rules and guidelines have yet to be released, but let's not wait for that shall we? Let's pick out the data that is already out there and draw our conclusions from it.

PERA stands for Personal Equity and Retirement Account. One of its aims is to boost the country's savings rate, which is "pegged at 19 - 23% of the country's economic output, one of the lowest in the region". Let's compare that with our Asian neighbors, and you'll know why we're still far behind the curve.

Here are pertinent broad details about PERA which I got all over the net -

Under the PERA law, which was approved by Congress on June 10, a contributor with the capacity to contract and possess a tax identification number, may make a maximum contribution of P100,000, or its equivalent in any convertible foreign currency to his PERA annually.

All contributions and interest and dividends earned by these accounts — similar to 401(k) pension schemes in the US — will be tax-exempt provided the account owner or "contributor" does not withdraw the funds before age 55. A contributor can also claim an income tax credit equivalent to 5% of the total PERA contribution.

Contributors can open up to five accounts but with only one administrator, which can be a bank or a financial company. There will be separate custodians of funds and a designated investment manager. Administrators can be investment managers.

The contributions can be invested in mutual or unit investment trust funds, stocks, and other financial products.

A contributor can make a total maximum yearly investment of P100,000 or its equivalent in foreign currency. If the contributor is married, each of the spouses will be entitled to make a contribution of P100,000. OFWs are entitled to double the limit, which means the investment can be as high as P400,000.

A contributor may opt to contribute more than the maximum account but the excess will no longer be entitled to the tax credit. Employers can contribute to their employees’ accounts, as long as they pay the required Social Security System premiums.

Payments may be made when the contributor reaches the age of 55. This can be either in lump sum, a pension for a definite period, or for a lifetime. The account owner may choose to continue his PERA even beyond the age of 55, but complete distribution will be made upon the death of the contributor regardless of age.

Early withdrawals will be subject to a penalty, except in cases when the contributor is totally disabled for more than a month due to an accident or hospitalization.

There are already a number of viable instruments out there like mutual funds, uitfs, the stock market, etc. My question is - pending the release of the implementing guidelines - how soon will banks/financial institutions and company HR departments make an arrangement for employees to enjoy the benefit? My other question is, what is meant by a contributor can open 5 accounts? So the bank or the financial institution will have a new product called a PERA account?

Will the law be retroactive? Say, if someone already has an investment in mutual funds, stocks, et al, can he submit the receipts during the ITR filing in April?

I hope these questions will be answered within a few weeks' time. I am sure there are tons of other questions out there, but at least, that is a better question than asking, "When will the bill be signed as law?"

Property: Still Good?

2008-08-15T09:36:00.000-07:00

Last week I mentioned that I'd be discussing a bit about property investing. The one true thing about real estate - which most real estate agents won't say - is that there will always be real estate available. Although if you believe Lex Luthor, land is something people don't make more of.

True, but, as you may have seen by now, the gajillion condominiums being built everywhere in the metropolis (no pun intended), just goes to show that real estate will always be there. And the problem is, we don't know when the supply tips the scale of demand. Already, people have been saying that there would be a slowdown in the Philippine real property sector.

This has been evident in the Property Index of the Philippine Stock Exchange Index, as stock prices have fallen through the roof since January. Recently, there was a rally that started in late July up to the present. So far, based from a report I saw, 2008 2nd Quarter vs 2007 2nd Quarter has been generally positive for ALI, negative for VLL.

I don't have industry figures as public documents are hard to find unless they have already been reported in the news. I was able to find one though, published by the Philippine office of Colliers International. The report is a bit dated as it came out in April of this year.

Try reading this excerpt -
"Massive oversupply of residential condominium units in locations such as Fort Bonifacio where capital appreciation and rents may be subdued."

Condo sales may have picked up since April, but so has inflation. It doesn't take a rocket scientist to ask the fundamental question, "Don't you think there's just too many condos at The Fort?"

Let's try to make some guesstimates here -

Assuming there are about 20 projects being presold in the area, with each having an average height of 18 storeys. Then each story has about 12 units per floor. What do we get? Around 4,320 units that will altogether be turned over by 2010 or 2011.

It doesn't seem to be much until you ask yourself this question - who are the buyers of these condo units? End users or investors? If it's the latter, then I'd assume that the properties are for rent. There'd be 4000 units competing for tenants that rentals will probably be below what should be due. Apart from that, it is to my understanding that people who work in Makati and the Fort go home to Quezon City or Manila or other far away places. That's why the traffic is a killer during rush hour.

I'm not bashing the local property sector, but it pays to be wary of the direction the market is headed. I'm on the side that thinks we're headed into over supply territory. I do hope I am wrong.

The Fort in 2012.

Picture courtesy of this.

Where to now, oil?

2008-08-09T06:16:00.000-07:00

Well well, are you not surprised that I am delayed again by one day??? Well you can thank the brownout we experienced last night. I actually blogged about this (today also) in this entry. Apologies my friends, apologies.

Wow, the DOW was DOWn quite significantly Thursday night but we managed to close higher. Amazing. But are these just pure technicals? The BSP has issued further inflation warnings yet the market is still making highs - we're touching the support level made during the last week of April.

The PHISIX

So far, there has been a new round of bad news in the US front - a big financial institution raising capital casting doubts about the end of the credit crisis, housing prices nowhere near a bottom yet. The only bright spot is that oil is falling, but it seems to me that it's not just a demand issue, but also that the dollar is going up (vs. the euro). To quote the report -

``The decline in oil was a critical factor,'' said Gregor Logan, the co-chief investment officer at New Star Asset Management in London, which oversees about $41 billion.

Let's see the chart of the Phisix once again -

I've attached the chart above, squint if you have to hehe, here are the highlights of this chart -

1. The technical indicator, is erhm, indicating to us that the market has been trying to reverse its trend (by crossing over the centerline) for the previous two times, only to fail. On the third time,
the performance of the market allowed it to go past the centerline and compared to the previous two times, the volume is actually higher.
2. We are now above the two moving averages - the 260 and 100 MA., and is reaching the 60 day moving average, which could prove to be a strong resistance.

So on Monday, you better watch out, you better not cry, you better not pout, I'm telling you why, Santa Claus is coming to town. Or so I hope.

I just have one problem with the chart, the price chart of Phisix is a breakaway gap, following an inconclusive price pattern (i.e. no visible triangle, etc). This could mean that there is still weakness in the days or weeks to come. So don't get overconfident and think that the bull has returned.

Oil, where art thou?

If my chart interpretation is correct, oil will go down for the next 3 months. I mentioned in a previous entry that oil was going to pop because it was a bubble in the making. I just didn't realize it'd be this early... and this deep. And this also means I may have to correct my assumption that the market will have a good 4th quarter rally.

My basis for assuming the 4th quarter rally was on the assumption that oil would come down sometime in September. But it's more likely that oil will resume its upward movement in the 4th quarter, when the winter season in Western countries kicks in. So far, the bearishness on oil has been due to the demand issue and the strengthening dollar.

But we also have to consider that trading oil, just like stocks, is forward looking. That means more investors and fund managers are expecting that global demand will weaken further. And if that is so, why are you bullish on stocks? Why are you also bullish on commodities? Wouldn't the slow down affect every major tradeable security?

So far the most important gauge for you will be the profit declaration, and profit warnings that companies will give. Locally, only a few companies have reported their earnings, and it's not as good as you'd expect. But I'm keeping my view open until I see the announcements of all of the banks and property companies. Ayala posted good numbers, I just don't know if it's ahead, below or at par with analysts' estimates.

So it's still a wait and see mode. Again, (stock) traders/buyers beware. Caveat emptor.
Do not go long unless you are an investor.

By the way, I'd like to celebrate my BLOG'S FIRST YEAR ANNIVERSARY. Exciting things are in store once my plans are underway. I've been delaying them because I haven't had time to focus on it, but watch out soon! Let's take a trip down memory lane and look at our very first post - The Guerilla Economist.

I'll write something about the property investing next week. See ya!

I've been adding subtle tweaks. Expect more in the weeks to come! See you again in my next entry.