Friday, 27 July 2012
MANILA, July 25, 2012–The renewed push for the controversial “reproductive health” (RH) bill could derail the country’s economic growth, which hinges on consumption and a growing working population, the prestigious Wall Street Journal has warned.
In the opinion piece titled “Keeping the Philippine Dream Alive,” the global business daily praised the economic gains of the Aquino administration but cautioned against an anti-population growth mindset.
“The Philippines doesn’t have too many people, it has too few pro-growth policies,” the Wall Street Journal said.
“[Mr. Aquino’s] promotion of a ‘reproductive health’ bill is jarring because it would put the Philippines in danger of following China’s path into middle-income development followed by a demographic trap of too few workers,” it said. “Overall, however, there is a sense that Mr. Aquino is on the right track, and that impression is the country’s biggest asset at the moment.”
Read "Keeping the Philippine Dream Alive" at the WSJ.
MANGUN ON MARKETS
A ROUND 2006, a couple of global pharmaceutical companies devised a plan to occasionally manipulate the drug market and release a virus into the air and water supply. The illness that the virus caused was not serious or life-threatening. People just had to buy an extra cold medicine or two and profits went up.
Soon, other pharmaceutical companies noticed that something was happening and the rest of the companies slowly became involved and participated. The more participants, the more the potential effectiveness of the scheme. Even suppliers of the raw materials for the drugs became involved. The whole planet was affected. Governments, corporations, and literally billions of ordinary people were forced to pay for drugs that they would not have needed if the global pharmaceutical companies had not conspired and participated in this great plan.
The highest government agencies that monitor and regulate the activities of the drug companies knew something potentially disgraceful was going on but they turned a blind eye to the situation. In some cases, they, too, may have helped the plot along.
In 2008, against the backdrop of the growing financial crisis, some people noticed the usual profits of the pharmaceutical companies, but even global regulators dismissed the notion of any illicit activities after conducting their own investigations. Those who continued to speak about this global conspiracy were treated as ignorant and only looking for publicity with their wild theories.
In February 2012 the US Department of Justice opened an investigation with others, Japan, Canada, and the UK following with their own inquiries. By early July 2012, the full scope of the operation was revealed. The pharmaceutical companies may have profited by as much as $29 trillion over a few years period.”
If this were a true story, you would think that it would be headline news in every paper and on every TV channel that you see.
Except that it is a true story; you only have to substitute “banks” for “pharmaceutical” and “virus” for “interest rates.”
An interest rate is the “price” of borrowing money. If you go to the market and want chicken, you pay the price for chicken. If you want to borrow money you go to the bank and the price to borrow is called the interest rate.
Interest rates, like the price of chicken, should be determined by markets forces of supply and demand. A very important benchmark for interest rates is the Libor or London Interbank Offered Rate. Libor interest rates are calculated every day for 10 major currencies over various borrowing periods from one day to one year. Between eight and 20 global banks put in their interest rate offers and from that a global standard interest rate is established each day.
Over $300 trillion of financial instruments use the Libor rate as a benchmark. For example, large Filipino companies may borrow hundreds of millions of dollars at an interest rate that is tagged to the yearly Libor rate. Your personal credit-card rate and car loan may ultimately be tied to Libor rates.
It is difficult to describe the significance of this conspiracy. It is obvious at this point that the central banks, the US Federal Reserve and the Bank of England knew about the price-fixing and may have even encouraged it to make the banking system look more financially sound.
Without any doubt, this is the largest financial scandal in world history not only by the amounts involved but by the global scope.
The Bangko Sentral ng Pilipinas has assured us that there is no interest rate price-fixing by local banks. If that statement is true, it only means that local bankers have more integrity than those in the West. I wonder. I hope so.
I guarantee that you personally contributed a few bucks to the banks’ extra $29 trillion in profits. And there is nothing you can do about it.
What the “LIEbor” scandal proves is both the power of global banks and their unholy alliance with the central banks and governments.
E-mail to firstname.lastname@example.org, web site is www.mangunonmarkets.com, and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.
Tuesday, 24 July 2012
OUTSIDE THE BOX
TOO many of the people that invest in the stock market only have a minimal understanding of what it is all about. Most people should not invest in the stock market.
If you believe there is a fool-proof strategy for making money in the stock market, you should not invest. I wish there was, but after more than 30 years in this business, I have yet to find one. There is no guaranteed winning formula. Anyone who tells you that there is, is either a fool or a liar.
The most popular “guaranteed” strategy is one of several variations of dollar-cost-averaging. You buy the same peso amount of shares of a big blue chip stock every month and eventually you will be a millionaire. It is based on the idea that stock prices will always eventually go higher. The other premise that the “expert” does not tell you is that you better not ever need your invested money until you do become a millionaire. They like to quote Warren Buffet saying, “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
Buffett does not buy stock. He buys companies using the stock market as a vehicle. If the company and its share price do not do well, he likes taking them over and running them. That is his Plan B and he is good at it. You cannot follow Buffett’s Plan A without being ready to do Plan B.
San Miguel is a big company. It is a well-operated company. Let’s suppose you started buying P5,000 of San Miguel every month since January 2011. You would now be down 10 percent. Start your monthly buying in January 2010, you made an annual return of 7 percent. Even if your buying started in January 2009, you still only earned 7 percent per year.
Imagine walking into an automobile dealership ready to buy and being told you could buy but not drive the car. Or having the property salesperson inform you that you were not allowed to live in that new condo you just bought. Better yet, the bank manger thanks you for opening a new account but says that when you do want to withdraw, you might have to wait days, weeks, or months to get your money back.
Every form of dollar-cost-averaging goes against the basic stock-market principle of instant liquidity in the same sense of a bank account being instantly available. Having to hold issues until they become profitable is like buying the same lotto numbers over and over until you win. It makes no investment sense.
But there is an even better way to lose money and opportunity than using dollar-cost-averaging.
Again, too many stock-market investors use less care in buying securities than they do buying a pair of shoes. They look only at the price.
Have you gone into a department store and found a pair of shoes previously priced at P5,000 marked down to only P1,000? Of course you have. And you immediately put your money on the table and bought them. Of course not. You waited to make your purchase to find the shoes in your size. A pair of shoes you cannot wear is not a bargain, is not cheap, if you cannot wear them.
Price is one of two considerations in purchasing a stock. The other is the trend of the price. An issue that was at P200 that is now at P100 is not a bargain if it is trending to P50. However, too many investors look for bargains. A stock that was P50 that is now P100 on its way to P200 is a bargain. But many investors do not look at it that way and should not be putting their money in the market.
If you do not know what you are doing, stay away from the stock market.
E-mail to email@example.com, web site is www.mangunonmarkets.com and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.