The Unemployed

I was watching the evening news and I caught an ABS-CBN clip showing a job fair. In view of the whole republic, the lady behind the desk asks a man,

"Okay lang ba sa inyo maging janitor?" (Do you want to work as a janitor?)

Tears slowly trickling down his eyes, the man weepingly replies, "Opo maam, basta lang matulungan ko ang nanay ko. May diabetes siya, wala kasi siyang pambili ng gamot."(Yes maam so that I can help my mother buy medicines for her diabetes.)

I find that so disconcerting that I still can't think straight about the Waves of Philippines Business I'm supposed to blog about. According to news, the country expects about 800,000 in LOST jobs this year. Let's make a tally of the reported losses to date -

FEDEX - 500 jobs cut
Intel - 1,800 jobs (It's a small small world, probably as small as the current job market. I recently found out that a friend's sister worked there, and she was one of those who lost their jobs)
Accenture - 500 jobs (I scoured the internet and found this from Yugatech.)

Anybody else who has their own tallies, please share. It is estimated that there will be 60,000 people who'll be out of work in the IT sector.

60,000 out of 800,000 is how many? 7 and a half percent. It makes you wonder where the other 92% of job cuts will be coming from. This coupled with the ominous return of displaced OFWs and people who have lost money to pyramiding rural banks and unscrupulous preneed firms make for a grim picture doesn't it? I can't help becoming a Yogi bearish person.

So amidst this, what can we do? What CAN we do?

I don't want to be like Dr. Doom, who today in CNBC proclaimed GE (the company that owns CNBC) and the United States as JUNK BONDS, live and within ear shot of those who watched the show this morning. He also states that the US could follow the Zimbabwean road, and that is 200% inflation rate. He isn't called Dr. Doom for nothing. Heh.

Manage your paycheck now. Control your spending. While it's good to spend (it boosts the economy), you don't want to overdo it. The next thing you will be holding might not be a paycheck but a pink slip. Stay safe.

The Waves of Philippine Business P. 5

Healthcare, the next wave

Last week I mentioned that the next wave for Philippine business could possibly be in the arena of healthcare. You may be wondering, healthcare? Didn't we just send off the last batch of graduating nurses abroad?

While the local healthcare system is certainly needing of more nurses, it makes sense - at least to me - that this is the plausible next wave for business opportunities. One must remember that healthcare is a very very broad word that carries with it a lot of sub-industries. Which is why it's worth noting them down.

Let me name them -

Health Insurance
Health Products
Health (ier) Foods
Hospital Care
Nursing Home
Cheaper Medicines
Medicinal Alternatives

In fact, healthcare may also encompass other industries like dermatology clinics and the booming wellness clinics like spas. With that in mind though, it seems that I am again, behind the curve.

Better Late than Never

Yet, sometimes being behind the curve has its benefits. If you're the pioneer in a certain industry, you almost always have bigger challenges to surmount. This means then, that you also have to have more capital and tons more amounts of perseverance, to survive. Of course, the flipside is that the returns are much higher. The reason is that you have to teach your target market and to acquaint them, and to convince them that they need your product / service.

This brings to mind Smart Money. Smart Money was launched sometime in the earlier part of this century, and to my knowledge, it flunked. This year, they relaunched the product with heavy TV advertising. I wonder if it's made inroads already into the psyche of Filipino consumers. I think that mobile commerce is a lucrative business (more on this in a future post), but right now, the market is still small.

The critical base - the masa crowd, believe it or not, are important in sustaining any business. Consumer goods companies need them to survive. SM needs them to survive. Tutuban and 168 Mall needs them to survive. Since a majority still dont have access to Internet in their homes, it will take more time for mobile commerce companies to really fly in this country.

The other market for mobile commerce - the middle class market - would be a good target market. But in my opinion, I think they are just not ready yet for mobile commerce. Besides, the supposedly cheaper prices of Internet cannot match the vastness of the catalogue (and of course price) of products found in Divisoria. People still brave the horrendous traffic and pickpocketers just to find a good bargain. Moreover, you can't try on a shirt or a pair of shoes on the net now can you?

What am I trying to drive at here?

While using Smart Money alone as an example is not a good indicator, I am relying here on pure gut feel. A gut feel that tells me that being the first isn't always the brightest idea. Especially for an SME entrepreneur.

As you can see, being the first may have its advantages; however, it also brings with it a confounding set of problems. Being behind the curve, albeit not too behind, will allow you to cash in on a certain market without having to put up an insane amount of capital.

Business Cycle

Business will always come in cycles, no matter what an optimistic economist may say otherwise. The current housing problem in the United States is nothing extraordinary, you can't keep on buying houses. There's got to be a plateau at a certain stage. It's what businesses do during the plateau stage that ensures its survival.

The business cycle usually comes in four stages. The infancy stage, the growth stage, the maturity stage and the decline stage. The length of time per stage depends on business to business, industry to industry. Apart from that, you have to know also if there is a decline stage at all for a particular industry.

So far, the telecoms industry is in a prolonged maturity stage. I doubt that there'd be a decline stage in the foreseeable future. People need to communicate. The decline stage though, will come for a particular type of technology. Like how pagers were wiped out from the face of the earth with the entry of the more compact mobile phone.

More in my next enry. Thanks for dropping by!

** I'm posting later than Friday, for that I apologize. I'm busy doing something right now and I have to prioritize them over my blogging. Thanks for dropping by :-)

The Waves of Philippine Business P. 4

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!

Commodities Hunting

Welcome back! I would like to take a break from the series of blog entries I'm writing. It's about my perception of Philippine business as well as my (attempts at) prophesying what would be the next wave of Philippine business down the road. For the first two I've posted -

For my first post please visit here - Part I.
For my second post in the entire series - Part II.

This year was touted as the start of the mining boom for the country. However, as you can see, it's been anything but. Red tape, local tribal protests, and more importantly - the global credit crunch, has probably crimped any remaining hopes of big ticket mining investments - at least in the near term. So far, commodity prices have also been hammered along with the stock market.

Oil, one of the most traded commodities, was for a time at a high of $155 a barrel and has now plunged to half of that. Experts call it economic slowdown. Pundits call it speculation. Critics call it manipulation. Pinoys call for a price rollback.

A friend and I were discussing about our sentiments for 2009, and while I was admittedly bearish, he was seeing the glass half full. I told him about the possible breakdown of financial institutions, including the local ones. He said that while worldwide, we are indeed in a crisis, he said that it isn't the end of the world yet. If the crisis is as bad as it is being pronounced by media, then we would already be at war right now. That was his two cents.

And two cents mind you, is the worth of OV...well actually less. The stock certificate is probably more expensive than the share price. That's the time you think that the current stock market values are preposterous. I guess this is also the time you call a market bottom - when the costs associated to the production of stock certificates is more than the value of its stock price.

OV, along with OPM, PERC is a classic case of how the Philippine stock market works. The Galoc oil field has been producing oil, although they have not yet been put to commercial use. Apart from that, a nearby site has been discovered to have oil as well. I'm not sure if it's this one. So on paper, there seems to be something positive about these oil companies. Yet, these stocks are in the doldrums. Go figure.

(Yeah, I know it's also attributable to the credit crisis. Blame everything on the credit crisis. But I think what is more important is to know who were the people behind the curtains called "credit crisis".)

This also makes you think that maybe, the stock market is just one big playground for speculators. Obviously, when the there is a bear market, speculators are not in the game. When everything starts turning bullish again, they come back right in, fueling the "growth of the stock market", or "creating wealth", etc. I'd imagine that if this were a bull market, OV's share price would be skyrocketing to the moon.

So is the bottom near? Are we in the capitulation stage? I believe that more likely, we're in the kaput-ulation stage.

What about commodities? Are they the way to go for your money? Older generations of Chinese-Filipinos would always say, put your money in property and gold. Although it sounds like sage advice, it lacks one important element - and that is the timing.

When do you buy? How long do you hold on to it?

Another friend and I were talking about gold, and he asked if it would be alright to shift his money to gold. I asked him one simple question - how are you going to liquidate it in the future?

Yes, it is possible for you to buy gold, but the problem arises when you need to dispose of it. Apart from the fact that it's hard to sell it, it's also hard to find someone who is selling genuine gold bars. Then, even if you find someone who is selling gold, do you know how much money you need to buy?

Doing a layman's computation and analysis, let's examine -

Based on Kitco, one ounce of gold is at $700, more or less. To make it easier for you to understand just how expensive it is to buy gold, let's use a Coca-Cola 8oz bottle. If that 8oz bottle was filled with gold, then you would have -

8 x 700 = $5,600 due to the seller

But since we're in the Philippines, let's multiply that with the latest Peso-Dollar exchange rate of 48.51 then you have -

Php 271,656 for one 8oz of Coke.. er gold.

Still want to buy gold? I think the more prudent approach is to buy gold jewelry. They won't be worth as much as the gold bars, but, in the event of a cataclysmic event like a world war as a result of the financial turmoil, even jewelry can be used as barter for goods. Your property will be worth nil as it will probably be seized by the occupying forces of a military organization.

The Waves of Philippine Business P. 2

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