Tuesday, 17 November 2009

RP: Pound for pound

John Mangun
Outside the Box
http://www.businessmirror.com.ph/home/opinion/18601-rp-pound-for-pound.html

Even those of you who are not necessarily boxing fans should have watched Sunday’s Pacquiao fight. The Pacman again demonstrated his complete dedication to his craft and showed his utmost professionalism. Measured, cool, fighting within his game plan, Pacquiao did everything right. It was not a flashy exhibition. It was an exhibition that hard work and discipline can bring outstanding rewards.

And it was yet another opportunity for some normal Philippine bashing even in the sports world.

The HBO announcers yet again were not willing to concede that Pacquiao is simply the best. During the first round it seemed according their comments that Cotto’s blows were devastating while Pacquiao’s punches were just not strong enough. These sorts of comments continued until the eighth round, by then everyone on the planet knowing what the outcome was going to be: a Pacquiao win. But still one announcer said, “Cotto can still win this fight on points.” The only way Pacquiao could have lost a decision is if he had gone to the Las Vegas Jollibee for a couple of rounds of Chickenjoy with extra rice.

Talk is cheap. There is a gambler’s insult: “Put your money where your mouth is,” meaning that if you’re going to give an opinion, you need to place a bet to back up that opinion. In the case of the Pacquiao/Cotto fight, money did talk. Manny was a 3-to-1 favorite against welterweight champion Cotto. Talk is always cheap, in sports and everything else. You want to know what the truth is? Follow the money.

That is why I have such a great problem with the economic “experts”; they are all talk, with no money in the game.

That is why I listen to the business people, from the palengke to Makati; they have a stake in what happens next.

All this year, the “experts” have been saying the Philippine economy is a piece of garbage and getting worse day by day. This has been an unending phenomenon. Every positive uptick was met with skepticism and rebuttal. But around last June, I noticed a change in the attitude of the businesspeople I talk to. They were still cautious but there was the belief that if things were so bad, how come their own companies and businesses were not suffering like the “experts” told them they should be? Some said that maybe they were just lucky or blessed.

By September though, it was obvious that a whole lot of businesses must have been living under a favorable star. And now businesses were spending a little money looking toward the future for a change.

Of course, even the experts could not ignore what the local stock market has been doing all year. They could not very well call you investors stupid since your portfolio was up 20-30 percent for 2009. All the while the market was moving up though, there were a few comments that the market was only riding on the “strength” of the US economic recovery, a recovery that is still a myth. But there again you can look at the money.

The net inflow of foreign portfolio investment this year is $358 million against 2008 net outflow of $1.3 billion. That is a $1.6-billion reversal. But even that is not the full story. The gross inflow for the first 10 months of 2009 is over $5 billon. That means that $5 billion of foreign “hot money” came into the Philippines, bought stocks and government short-term debt, and some took the profits back home. And this past October, 67 percent of the $700 million that came into the Philippines was invested in the local stock market.

Not bad for a country with a “bad” economy.

But we all know what the economists think of stock-market investment. Short-term, not good for the long-term economy, easy money. What about “real” investment?

From BusinessMirror November 12: “Foreign direct investments grew a little over 30 percent in the first eight months to $1.3 billion.” How can that be? Don’t these foolish foreigners know that the Philippines is not the place for investments? Earlier this year the Bangko Sentral ng Pilipinas had estimated $500-million hot-money inflow; now it is three times as much.

The world is awash in dollars right now. You can borrow in the US for almost nothing, take those dollars to a country lie the Philippines, and make much more profit than staying in dollar- denominated assets. The Philippines is benefitting from this situation.

Now that 2009 is coming to a close, I wonder if we might have benefitted more from the world situation. I wrote many months ago that we were in an excellent position to take advantage of global conditions, that our economy would be much stronger than expected, and that all the negatives (remittances, overseas job losses, slower foreign investment) were just not going to happen. At that time, the government had the opportunity to rise to the occasion by strongly defending and promoting the country. Instead, our financial leaders acted like frightened schoolgirls, almost with all the negatives.

Maybe next time, we will have leaders with confidence in the Philippines and with the courage to put their own mouths and money with this nation and not with the “experts.”


PSE stock-market information and technical-analysis tools were provided by CitisecOnline.com Inc. E-mail comments to mangun@email.com.

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