Phisix 7,900: Knowing The Price Of Everything And The Value Of Nothing

The current state of the market has reached what literary wizard Oscar Wilde described as “knowing the price of everything and the value of nothing”.

Here is a trivia. How did the Phisix respond to the declaration of martial law in September 1971? Answer: on a monthly basis, the Phisix crashed by a shocking 35%!!!

Though the incumbent likens the current martial law with its antecedent, I know that today’s martial law is different from 1971.

Last month, the Phisix even climbed 2.3%

The Phisix hasn’t been jarred by the slowing GDP and eps growth, the Marawi crisis, the declaration of martial law and by a lone wolf attack at a casino.

Such showcases the prevailing entitlement mentality of special interest groups, comprising mostly the banks and non-banks financials, which now sees stock prices as a one-way street. For them, all forms of risk have been assumed away – out of existence!

The day of the attack on a casino, the Phisix even soared by about 1% to 8,000 at the opening bell, for the second time in barely a month, but succumbed to late day selling.

The better term is PUMP and DUMP!

 

Last Friday’s mark on close dump orders had been pretty awesome! (see leftmost pane) Some notable numbers: JGS -2.85%, MBT -1.6%, SM -1.3%, GTCAP -1.3%, BPI-1.2% and TEL -.8%! Stunning!

Imagine orders from a 6-minute transition window creating such fantastic price changes to determine the closing numbers???!!!!

These dumps wiped off the gains (-.56%) that transformed into a loss for the Phisix (-.25%)!

And during the week, days where the Phisix suffered a decline, sauve qui peut pumps were used to mitigate losses.

That’s how one breaks 7,400 and get to 8,000. And this is called normal…only in the Philippines!!!

The essential function of the stock market is to coordinate demand and supply of capital and savings through the pricing system. Apparently, not even highly paid ivory tower experts, analysts and CFAs appear to understand this basic economic function.

So when the pricing system is impaired so is the economic structure that pillars them. (As evidence, media has recently acknowledged the emergence of significant number of vacancies in the race to build shopping malls)

 

The evidence is all over.

Such rampant price fixing process has engendered magnified price volatility!

This week’s .51% jump in the headline index comes with 70% of issues with at least 1% price change, 47% with at least 2% and 40% with a minimum of 3%!

Such marvelous episode of volatility signifies a symptom of the deepening pricing or financial instability. And this should be one of the principal reasons why the Newton’s law will eventually and ultimately govern.

And because of the obsession to maneuver the Phisix past its previous record, what has been happening is that most of the price actions have centered on the top 15. Most especially the top 5 which carries a market cap weight of now FORTY percent! (as of Friday, June 2)

For instance, the hefty price gains of the top 5 had been responsible for over 54% of the market-weighted performance of the PSEi’s weekly .51% gain.

And as a result of massive pumping on the biggest market caps, the distribution of imbalances can be seen via the priciest of securities which have likewise been concentrated on the top 5.

The slope reveals the direction of price pumps through the years.

And yes, 2 Sy issues once again set new records this week. SM hit its fourth record-breaking high for the year while SMPH hit its third.

So 50% or half of the annualized 22 Price Earnings Ratio (PER) of the PSEi 30 (based on the market cap) has been due to the top 5.

And because of the difficulties in the participation of broader issues, the PSEi have tactically been driven to current levels via vertical prices!

 

And because of the concentrated vertical price pumps, record highs have either been reached or within the vicinity for 6 issues including SM and SMPH

So about 10 of the biggest market cap firms have been responsible for PSEi at 7,900…mostly through vertical price pumping!

One would wonder how econometric and statistical models of the establishment firms work.

Here’s the thing. The price level or the form doesn’t signify the essence. Rather the main issue is the substance or whether these actions are sustainable or not.

Vertical pumps have failed in two attempts as shown above. The 2015 version was more disciplined of the three previous records.  Yet it also faltered.

Now the Phisix is experiencing the third episode of vertiginous vertical pumping. Whether this ends in a terminal BW-SSO dynamic or another 7,400 jumping rope is something to be experienced. 

Nevertheless, what is unsustainable won’t last. In the Phisix’s 50 years of existence, ALL vertical price pumps succumbed to the Newton’s Law. This time won’t be different.

And given all the world problems, (housing and stock market bubbles, raging debt levels, intensifying geopolitical risks, rising protectionism or deglobalization) which are being suppressed by central bank interventions, I understand that world stock markets could similarly be in quasi-blowoff phases (see below FAW chart).

And all it takes is one proverbial prick to pop these bubbles. The chain effect would be on a global scale.