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. ***

Using Credit Where Cash is Due

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....