Tuesday, 6 December 2011

Get ready for the big move

Business Mirror

AT a luncheon many years ago, I had the privilege of sitting across the table from Dr. Sixto K. Roxas. Dr. Roxas is a man to be listened to, as his experience is so wide. An educator, corporate executive and investment banker, this is a man who comes to the conversation with a perspective that is enviable.

Dr. Roxas studied the history of the Philippines and came to conclusion that every six years, more or less, the nation went through a tumultuous period that created far-reaching changes. Long years after our conversation, the Estrada impeachment proceedings began and eventually Gloria Macapagal-Arroyo became the President. It has been nearly 11 years since Edsa 2 and like then, the climate is turning tumultuous.

However, I have no intention of entering the conflict of discussion about separation of powers and such. There are others more qualified than I to figure out the “rights” and the “wrongs” and the implication of all the players’ actions.

I will speak, though, about the stock market.

The business headlines yesterday tell part of the reason I find stock-market trading irresistible. The Philippine Daily Inquirer said, “Philippine stocks forecast to rise” while the Philippine Star quoted opinions that, “Stocks seen listless this week.” Can both opinions be true? Absolutely. In a sense, the writers of those headlines represent the basic contrary opinions of the stock-market participants; the buyers and sellers.

As I have said so many times before, buyers buy because they believe prices will never be any lower than today. Otherwise, why buy now? Sellers believe prices will never go any higher and that is what makes for a stock market.

Do not think either, that the opinions held by the buyers and the sellers at the stock market are any less emotional and strong as the opinions held by those in the political arena. Everything is clearly black and white. For politics, it is always that opinions are either right or wrong. For the stock market, it is always that prices will go up or down. There is no gray area.

While the front pages of the newspapers talk about the tug-of-war going on in the political front, there is no less a “war” happening on the Philippine Stock Exchange between the buyers and the sellers that will determine the future of stock prices.

Buyers believe that conditions will move prices higher; sellers believe the opposite and see prices moving lower in the months ahead. Simplistically, some pundits believe that presidential power must be strongly used for the good of the country. Others are convinced that strong control of that power is most important.

Back to Dr. Sixto’s cycles. Twelve years ago the Philippine Stock-Exchange index was priced at 2,000. Now the index is well above 4,000. Sure, there have been ups and downs, with the index falling as low as 1,000 in 2003. However, the market is up over 100 percent in 12 years.

Dr. Sixto told me of minor three-year cycles also. Now it gets interesting. From 2000 to 2003, the market was down 50 percent from 2,000 to 1,000. In the next three-year cycle, the market doubled up from 1,000 back to 2,000. During the period 2006 to 2009, prices went on the roller coaster, first going higher by 75 percent and then falling all the way back down to 2006 levels in 2009. And the ride was not over. From 2009 to now, nearly in 2012, we again have witnessed the index double from 2,000 to over 4,000.

What’s the point?

The point is that the stock market is now building an incredible amount of pressure to make a large move not seen since beginning in 2000.

One column here could give you a very detailed and hopefully accurate prediction that prices are going to reach highs that are unexpected. Likewise, another could equally give you an analysis of why prices are going down, much in the same way the two newspaper headlines disagree.

There are clues all around us as to what the future will bring if we know where and how to look for them. Pagasa said a few days ago that we would have some rain this week. It was not a guess or a hunch or magical wisdom. It was a reading of the evidence in front of them. Only, they have the experience to understand and interpret the data.

If you are a stock-market investor, come by mangunonmarkets.com and subscribe to the Premium Area to get prepared.

We are soon going to see movement on the PSE that we will look back on as a monumental event.


E-mail to mangun@gmail.com and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.

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