Sounds Greek to Me

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.

It's Mine!

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

AT

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

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!

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!

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

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

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!

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!

Stock up on Stocks!

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!

Outlast... Atlas

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!

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

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

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.

(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)

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)

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'm Back!

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

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

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.