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.

Finding Solace

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?

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!