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 Talk "Money Talks" (Part One)

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!

Investing ... or speculating? (continued)

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?

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...

Investmenployment Part II

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

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.

The Waves of Philippine Business P. 4

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

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!

The Waves of Philippine Business P. 2

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

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 Movie You've All Been (Still) Waiting For (Part 2)

The PSEi closed down 13 points today to settle at 2,437.99. On a week on week basis we are up 68 points from last Friday's close of 2,369. At this point, the much hyped 4000 index level has converted many traders into forced investors. I wrote a five-part mini series before on the distinction between the two (i.e. trader vs investor). You may check the following links for each part.

Are you a stockholder or a stocktrader - Part I
Are you a stockholder or a stocktrader - Part II
Are you a stockholder or a stocktrader - Part III
Are you a stockholder or a stocktrader - Part IV
Are you a stockholder or a stocktrader - Part V

I have my own views on which one you should be. It's based on your personality, risk tolerance, available time and aptitude. The most important question is : Can you cut your losses when the going gets tough?

If you answered yes, then it's good. But that's just the first step. You also have to answer the following questions -

Can you be unemotionally attached to the stocks that you will buy?
Will you promise to follow your established cut loss point?
Will you promise to follow your trading system?
Will you also promise to be patient when in a bear market?

There are other questions in mind and it will always redound to three letters - Y-O-U.

As the poem goes, I am the master of my fate, I am the captain of my soul.

So if something goes wrong, it's not the stock market. It's not the other traders or investors out there. It's not your broker or the other brokers. It's not the speculators. It's you. When you put your money into a stock you think will go up, what are the reasons?

Oh, let me count the ways -

Speculation
Hot tip from (a) friend, (b) online forum, (c) broker, (d) relative, (e) a divine message
"Everybody's buying it, so why shouldn't I" syndrome
Business expansion
Business outperformance
Bullish pattern or formation seen in the stock chart

Whatever your reason for buying your stock, if that reason is gone, then why are you holding on to it? That's one simple question that even I tend to forget. That is why in the days spent that I was thinking about the market, I came up with a novel but unique perspective to cutting losses.

Last week, I ended with this note -
Although you don't have control over what is going on, what you have control over is ____. This is the power directors have.

What you have control over is what you see in the market - whether good or bad. What are the two verbs directors the world over scream when making a movie? One is ACTION. The other? Yes, you guessed right folks, CUT!

My friend, when you are a stock trader, you view the action on a boring screen that includes the ticker, the index performance, the volume review, and the stock quotes. This is the movie you are watching and it's in front of you whether it be a computer screen, a TV, or the trading floor. Since you are the director, if you don't like what you're seeing, i.e. your stocks' performance, what do you scream? CUT? And that! That is what you should do.

It's just three letters, but the sheer willpower to do that is formulated as follows -

CUT + Muslces + Guts - Emotions = CUT LOSS SUCCESS!

It will be difficult to do in the beginning. If you're already six months to one year into trading, and you still haven't done a single cut loss, I think you have to visit the nearest mirror and ask yourself if you are really a trader, or an investor.

If your personality is that of an investor but you still do trading, then you'll be burning your money faster than you can curse.
If your personality is that of a trader but you are investing, then you won't be maximizing your gains.

The most important thing is to determine what you want from the stock market and what you are if you are putting money into it. And if all signs show that you are a trader - and you can become a successful one at that - always remember, you're the director of the movie that plays out every trading day. At 9:30AM in the morning, it's ACTION. And in between that up to 1200PM, if you dont like what you see, say CUT!

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During the previous CAF, i made a gaffe. I said stay away from Meralco. My basis for that decision was due to the issues facing the company. I hope people were still able to make money when they thought beyond the issues and looked at the chart instead.

At least those who asked me about ATN aren't going to curse me this week. Hehe =p

I'm human, and so I do make errors in judgement.

Good luck to us next week!

P.S. This is weird. Today is Friday but my blog entry is published as a July 10 / Thursday entry. See you next week!