OUTSIDE THE BOX
IN less than three weeks the US is going to hold its presidential elections. While the race is virtually tied according to the opinion polls, there are firm indications from another forecasting tool that Mitt Romney will be the next president.
An interesting analysis is found in the work of two University of Colorado political science professors, Kenneth Bickers and Michael Berry.
Bickers and Berry look strictly at economic conditions, including unemployment and per capita income, and where their analysis differs from most, is they break this down to the state level, not just on the national level. The model they created has accurately predicted the next president in every election going back to 1980. Interestingly, their model said that Al Gore would receive more popular votes in 2000 but that George W. Bush would capture the presidency by having the most electoral voters.
The next president needs 270 electoral votes and the prediction is that Romney will win an overwhelming victory with 330 electoral college votes versus 208 for Obama.
The biggest problem in the US economy is a lack of confidence in the Obama administration. Banks are not lending and business is not spending. While all elections, here, there and everywhere, are as much determined by voter perception of personality and character more than policy and programs, business is hoping for a change, almost any change.
In the four years of the Obama presidency, the US government debt has risen from $5 trillion to $17 trillion. Even if Romney does capture the White House, that trend will continue for at least 18 months. What must be done, and this is Romney’s election platform, is to begin to reduce the government budget deficit to help control the growth of the debt. The Philippines experienced a budget deficit reduction through both the Arroyo and Aquino administrations. That is why government borrowing has been contained and that has been good for the PHL economy.
However, quantitative easing and money printing must continue as economic growth cannot increase soon enough or fast enough to reduce the government debt even under Romney.
I have said before that we can track the course and amount of Federal Reserve money printing by monitoring the price of gold. And I still stand by my “$3,000 gold in two years” prediction even as I predict a Romney victory, though my confidence in the gold prediction is much greater than the election forecast.
However, the blame for the current US debt crisis cannot specifically be laid at Obama’s feet or any other president’s as this has been a slow, creeping process since the mid-1980s that puts many global leaders and many global institutions at terrible fault.
Regardless of who is the next president of the US, the greatest problem facing the world and particularly countries like the Philippines is found in the gold/oil ratio (GOR). The GOR measures how many barrels of crude oil can be bought with one ounce of gold. Since 1946, the GOR has averaged 15 or 15 barrels of crude oil per ounce of gold. As of now the GOR is about 20, which means that oil is historically cheap or gold is expensive.
If gold reaches $3,000 because of a devaluing dollar, using a 15 GOR, oil would be $200 per barrel without any other negative changes in current geo-political/economic conditions. Gasoline in the PHL would cost P100 per liter. To pay the same price as today with oil at $200, the peso would have to appreciate to P22. So which is better; P100 gasoline or a 22 to one dollar peso? “Would you prefer the pistol or the poison, Mr. Bond?”
The world will not tolerate this happening as the US tries to save its economy.
If there is to be a sacrificial lamb, it will be the US as countries move off from paying for oil and other commodities with dollars. It is already happening. We will see a time when oil will be paid for in gold or exported goods valued against the price of gold.
That is why countries with smart leaders like Russia, Thailand and Mexico are continuously converting dollars and major currencies to gold. Other countries like Mongolia, Indonesia and Chile are developing their mineral resources as fast as possible.
The foolish nations are leaving their gold in ground and instead accumulating billions in paper currency as their rainy day reserves. It is truly frightening and astounding that government leaders learned nothing from the 1997 crisis and that situations can change literally overnight.
On Friday, June 6, 1997, the peso closed at 26. On Monday, June 9, the peso opened at 36.
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.
Friday, 19 October 2012
Ronnel W. Domingo
Philippine Daily Inquirer
The Philippines is expected to remain the most promising economy in Southeast Asia as the country performs better than the regional average, according to UBS Securities.
The financial services firm said in a new report that the Association of Southeast Asian Nations appeared to operate in a “different dynamic” as efforts to build a single economy progressed.
However, UBS noted that the Asean remained economically diverse—both in terms of size and level of development—even as it represented a population of some 600 million and a gross domestic product that was three-fifths that of Germany.
“Of the larger economies, we think the Philippines will continue to prove to be the most surprisingly impressive,” UBS said, citing analysis from economist Edward Teather.
Wednesday, 17 October 2012
Three Overlooked Emerging Market ETFs
By: Eric Dutram
Zacks Investment Research
For investors looking for a smaller economy that has been overlooked, the island nation of the Philippines could be worth a closer look. The country has a $350 billion economy which means that it is larger than Switzerland, Hong Kong, or Singapore. Yet despite this size, the country makes up under 75 basis points in VWO, practically a rounding error in total portfolio contribution.
Sunday, 14 October 2012
By: Likha Cuevas-Miel, InterAksyon.com
The online news portal of TV5
MANILA - More Filipino nurses and doctors can earn six-digit salaries without having to go abroad, according to a US-based business process outsourcing company in the health field.
"The access to this pool of talent is a plus for our clients. The skill sets of the Philippines is better than those in other markets," Rohit Kapoor, ExlService Holdings Inc. vice chairman and chief executive, said in a briefing on Tuesday.
Jaideep Pradhan, EXL senior vice president for operations and Philippine business head, said a company must offer handsome compensation packages to healthcare workers to make them stay in the country and slow down the brain drain.
Filipino nurses - who otherwise have to pay for their hospital training - can earn P18,000-35,000 a month in the country, while BPO companies like EXL foot the bill of their hospital training. The Nasdaq-listed healthcare BPO firm has a tie up with Manila Doctors Hospital for this purpose.
Depending on their clinical experience, doctors receive salaries of P100,000 to P300,000 in EXL and still get to practice outside their BPO work.
Aside from the normal BPO perks to workers, the company has to pay for the fees of those who need to take the National Council Licensure Examination, Pradhan said. Nurses are required to take the NCLEX so they can work in the US.
Pradhan said the company has to offer these perks - aside from the normal benefits other BPO workers receive - to corner enough skilled and licensed workers that their clients look for.
The New York-headquartered company has around 1,800 workers and close to 800 of these are nurses and doctors who hold US licenses.
"Our compensation is the thing that make us stay. Our compensation is at par with the salaries our counterparts receive abroad," Loraine Lopez, a nurse associate at EXL told participants of the 4th International Outsourcing Summit.
Lopez was a medical technologist who studied nursing so she can work in the US. While waiting for her work permit approval, she opted to work as volunteer nurse or nursing associate in various hospitals and clinics to get the training and specialization that would make her more marketable abroad.
There were times she would only get P3,500 a month - the same salary her family househelp gets - with free meals or none at all. She is a trained hemodialysis nurse.
After years of training or working for a pittance, Lopez' permit was denied after the US government tightened the entry of foreign nurses.
She said working in the healthcare BPO industry is a better option for those who want to earn well and have families in the Philippines.
According to Kapoor, EXL is putting up a healthcare academy to hone the clinical skills of the company's workers.
"Not all the talent is available in the market that is why we are making this investment," he said.
"It is always a risk that our trained workers may leave for work abroad but that is the risk we have to take," Kapoor said.
To make workers stay, EXL is offering a "very credible career path" so that if they want to graduate from being a nurse or a doctor dispensing medical advice through telephone, there are other doors opened to them like in insurance and other allied industries.
The company has also tied up with the Asian Institute of Management to groom middle managers.
EXL is opening a new 500-seat site in Cebu City and adding 500 seats to its existing site at the Mall of Asia in Pasay City.
By the end of next year, EXL will open a new site in Metro Manila.
By: Krista Angela M. Montealegre, InterAksyon.com
The online news portal of TV5
MANILA - The Genting Group of Hong Kong will hike its investments in the Philippines, which the company said has reached its "inflection point” amid government reforms, favorable macroeconomic fundamentals and a skilled labor force.
Speaking at the 38th Philippine Business Conference and Expo on Wednesday, David Chua, president of Genting Hong Kong, said he is "totally convinced" that "the Philippines is the right place, the Filipinos are the right people and now is the right time" to invest here.
The Genting Group, along with Alliance Global Group Inc., will pour another $1.2 billion in the next three years with the launch of Resorts World Bayshore in state-run Pagocor's Entertainment City project, Chua said.
AGI and the Genting Group have jointly invested $800 million in Resorts World Manila, the country's first integrated tourism entertainment complex, through Travellers International Hotel Group Inc.
Chua said it took him more than 10 years to return to the Philippines since his last visit in the 1990s. The Genting Group finally decided to invest here in 2008.
"It is because of it being the right time, the right place and the right people, that many believe the Philippines is hitting an inflection point, much like Indonesia did recently. I would like to say that from having invested more than four years ago, I believe that the Philippines has already hit that inflection point," Chua said.
Now is the "right time" to invest in the Philippines, Chua said, adding that government and policy reforms in eradicating inefficiencies and rampant corruption "usually sets the scene for the next stage of growth and development."
The Philippines has become an attractive investment destination because of its favorable macroeconomic fundamentals characterized by low inflation, improved credit rating, strong currency and an emerging middle-class.
Chua also noted the "young highly educated and extremely talented" workforce bodes well for the country.
"The Philippines is uniquely positioned as it traditionally [has] been an exporter of human capital especially knowledge workers. Unlike other countries such as Singapore and Hong Kong who have had to import skilled workers, the Philippines hitting her inflection point need only bring back home the OFWs," Chua said.