Which Is the Black Swan for the Philippines: The Big One or War?

 

Never think that war, no matter how necessary, nor how justified, is not a crime—Ernest Hemingway 

In this issue: 

Which Is the Black Swan for the Philippines: The Big One or War?

Part 1. Thesis: Nature: The Big One

1A. The Wittgenstein Trap

1B. Between Tectonics and Politics

Part 2. Anti-Thesis: Human Action: Man-Made Disasters

2A. Brewing Crisis: Second ‘Ayungin’ Thomas Shoal Incident

2B. Chinese 36 Stratagems in Action

2C. Escalation Beyond the Shoals

2D. The Root of War: Human Action

2E. Thai-Cambodia Border Clash and Thai’s Domestic Policy Fissure

2F. Fatalities: Wars Eclipse Earthquakes

2G. Unknown Unknowns-Black Swan Event: The Final Trigger

Part 3. Synthesis: Nature’s Convulsions vs. Man-Made Catastrophes

3A. The Human Trigger

3B. The Shape of Future Wars and the Grey Swan

3C. War Economies and Systemic Fragility

3D. Conclusion: The Shape of the Next Black Swan

 

Which Is the Black Swan for the Philippines: The Big One or War? 

Nature versus human action—which would happen first, and which would be deadlier?

Part 1. Thesis: Nature: The Big One 

A string of significant earthquakes—magnitude 5 and above—has recently shaken the Philippines.

Figure 1 

From Cebu’s 6.9 (September 30) to Davao Oriental’s 7.4 (October 10), to Negros Occidental and Zambales’s 5.1 (October 11), to Surigao del Sur’s 6.0 (October 11), to Surigao del Norte’s 6.2 (October 17) and to Ilocos Norte’s 5.2 (October 17), the tremors have been relentless and have drawn public anxiety. Both Cebu and Davao Oriental continue to record over a thousand aftershocks. (Figure 1) 

Despite denying possible interconnections among these tremors, officials and media have begun to promote the likelihood of "The Big One" in the National Capital Region—a 7.2-magnitude quake expected to “bring catastrophic destruction” to Metro Manila. 

The Philippine Institute of Volcanology and Seismology (PHIVOLCS) bases its forecast or hazard assessments on the West Valley Fault’s recurrence interval of 400–600 years, suggesting that “its next movement may possibly happen earlier or later than 2058.”

A Japan International Cooperation Agency (JICA) study further estimates that The Big One could result in 33,500 fatalities and 113,600 injuries.

Adding to the anxiety is talk of a “Culebra Event,” coined by independent researcher Brent Dmitruk, describing a potential chain reaction of earthquakes triggered by tectonic stress transfer across fault systems—like a slithering snake (culebra in Spanish). Though unsupported by mainstream seismology, the idea captures public fear that defies conventional models and timelines.

The Philippines, of course, is no stranger to major quakes and has endured two major quakes in modern history:

The Moro Gulf Earthquake (August 17, 1976, magnitude 8.1) near Mindanao and Sulu caused 5,000–8,000 deaths, from both quake and tsunami.

The 1990 Luzon Earthquake (July 16,1990. magnitude 7.8) centered in Rizal, Nueva Ecija, killed 1,621 and injured 3,500, destroying buildings even in Metro Manila—though fatalities in the NCR were limited to three.

First, these events show that even the strongest recorded quakes—occurring decades ago and in poorer eras—produced casualties below 10,000.

Second, with today’s supposed technological advances, stricter building codes, and a “wealthier” economy, it is doubtful that "The Big One" would match JICA’s apocalyptic estimates—unless the quake’s magnitude or duration exceeds historical precedents.

Third, when PHIVOLCS says it may occur "earlier or later than 2058," it essentially admits ignorance or uncertainty, dressed up as science. The 400–600-year interval is a broad statistical range—based on paleoseismic trenching data—not a clock.  

If the Big One hits in 2058 or later, many of us won’t be around to validate the prophecy—unless futurist Ray Kurzweil’s “Singularity” delivers on its promise to merge machine intelligence and humanity in the quest for immortality.

Fourth, earthquake prediction remains closer to numerical choreography than precise science.

As Wikipedia notes: “After a critical review of the scientific literature, the International Commission on Earthquake Forecasting for Civil Protection (ICEF) concluded in 2011 that there was considerable room for methodological improvements. Many reported precursors are contradictory, lack measurable amplitude, or are unsuitable for rigorous statistical evaluation." 

Even behavioral studies of animals as predictors have failed to establish reliability—no constants, no reproducibility. 

As Wikipedia notes, many earthquake ‘predictions’ are remembered only when they appear to hit — a textbook case of selection bias. In reality, misses vanish quietly into obscurity, while lucky coincidences are framed as scientific foresight. 

To date, no model has achieved reproducible accuracy in predicting the exact timing, magnitude, or location of a major quake—anywhere in the world. 

1A. The Wittgenstein Trap 

Seen through Wittgenstein’s Ruler (as applied by Nassim Taleb): 

Unless you have confidence in the ruler’s reliability, if you use a ruler to measure a table, you may also be using the table to measure the ruler. 

Applied here, government agencies present statistical intervals as confidence. If a quake happens within the range, it validates neither the model nor the state—it only confirms that earthquakes happen eventually.

If it doesn’t, the model isn’t falsified—it’s simply "extended." 

Duh! 

That’s the Wittgenstein trap: the model (the ruler) is never truly tested by reality (the table). Every outcome is reinterpreted to preserve authority. 

The likelihood that earthquake models hit their prediction—timing, location, and magnitude—is effectively near zero. 

Their utility lies not in prophecy but in policy: infrastructure codes, disaster preparedness, funding and others. More importantly, the political need to manage fear. 

Keep this in mind, the "Big One" may eventually occur—but whether it happens as predicted is almost entirely coincidental. 

And when it does, its qualitative effects are likely to depart significantly from the scenarios sold to the public by official experts. 

1B. Between Tectonics and Politics

Figure 2

Earlier, we proposed in our October 10 post on X.com that these seismic episodes may be “coincidental geologically, yet symbolically it feels as though the ground beneath us—literally, institutionally, and metaphorically—is shifting.”  (Figure 2) 

That remark, written amid an unfolding corruption probe, captured a deeper truth: instability in governance mirrors instability in nature. Both release pressures accumulated over time—one through tectonic strain, the other through moral decay—manifesting as eroding trust, public fatigue, and cynicism toward those meant to uphold order. 

Thus, the “Big One” is not merely a geological prophecy but an allegory for a state under pressure, its faults widening both underground and within. Economic tectonics—liquidity cycles, capital migrations, and policy misalignments—converge with political fault lines, creating a landscape where what is called “resilience” may simply be the calm before the rupture. 

For while nature’s tremors follow blind physics, the greater danger lies in human volition—where pride, fear, and miscalculation can unleash catastrophes far deadlier than any fault line. 

The next rupture may not come from the earth, but from the choices of men. 

Part 2. Anti-Thesis: Human Action: Man-Made Disasters

Figure 3

2A. Brewing Crisis: Second ‘Ayungin’ Thomas Shoal Incident

While the heebie-jeebies over “The Big One” and other earthquakes often grip the public, a more insidious tremor unfolds daily in the South China Sea. Media reports chronicle near-constant confrontations between China’s military and Philippine forces: Chinese jets tailing Philippine Coast Guard aircraft over Bajo de Masinloc, warships aiming lasers at Filipino fishermen, and water cannons battering resupply missions to contested shoals. (Figure3) 

The Second ‘Ayungin’ Thomas Shoal incident on June 17, 2024 marked one of the most volatile flashpoints in recent years. 

During a resupply mission to the BRP Sierra Madre—a grounded WWII-era vessel serving as a Philippine outpost—China Coast Guard (CCG) personnel rammed, boarded, and wielded machetes and axes against Philippine Navy boats. The skirmish left several Filipino personnel injured, one severely. Some officials described it as a “near act of war.” 

Even prior to this, China’s repeated use of water cannons had already prompted warnings that a Filipino fatality could trigger the 1951 U.S.–Philippines Mutual Defense Treaty (MDT). 

Still, officials refrained from escalating the matter, citing the absence of firearms—an example of legal technicalities serving as political veneer. 

But let’s be candid: this "restraint" was not a purely local decision. 

The United States, already deeply entangled in the Russia–Ukraine war and the Israel–Palestine–Hezbollah–Iran conflict, has been supplying arms, intelligence, logistics, funding and etc., across multiple theaters, likely sought to avoid opening another front with China. With its strategic bandwidth stretched thin, Washington may have quietly signaled Manila to stand down, avoiding direct escalation with Beijing. 

2B. Chinese 36 Stratagems in Action 

China’s tactical behavior in the South China Sea mirrors or aligns with several of the Thirty Six Stratagems, a classical Chinese playbook for deception and maneuver: 

1. Beat the grass to startle the snake – China’s repeated use of water cannons, laser targeting, and close flybys—especially when Philippine vessels are accompanied by media or U.S. observers—serves as deliberate provocation to test: 

A) Philippine resolve and limits under Marcos Jr.’s more assertive maritime stance; 

B) U.S. response thresholds under the 1951 Mutual Defense Treaty—will Washington truly go to war for Manila or is this just posturing? 

C) Sphere of Influence: Test ASEAN’s cohesion, identifying weak links, wavering partners, and potential recruits for Chinese influence 

2. Sacrifice the plum tree to preserve the peach tree – Accept small losses to secure larger strategic interests. China may tolerate reputational costs (international condemnation, legal rebukes) to maintain de facto control of contested waters and normalize its presence. 

3 Make a sound in the east, then strike in the west – Create diversions to mask true objectives. While public attention centers on high-profile flashpoints like Second Thomas Shoal, China quietly fortifies other positions such as the Paracel, (Subi Reef) Spratly Islands and Luconia Shoals, expanding influence with minimal resistance U.S. Army Pacific. 

There are more, but we opted to limit it to these. 

2C. Escalation Beyond the Shoals 

Philippine leadership has also amplified its rhetoric on Taiwan, signaling a shift from territorial defense to strategic alignment with U.S. interests. Defense Secretary Gilberto Teodoro’s visit to Mavulis Island, the northernmost Philippine outpost near Taiwan, was interpreted by Beijing as a provocative move. 

The United States, for its part, has accelerated its military buildup in the Philippines—provoking sharp responses from Beijing. 

• MRC Typhon: Mid-Range missile platform capable of launching SM-6 and nuclear capable Tomahawk missiles 
• NMESIS: Anti-ship missile system
• MADIS: Air defense system designed to counter drones and aerial threats 

These deployments have drawn sharp rebukes from China, which views them as encirclement. 

2D. The Root of War: Human Action 

While wars may have complex causation, their ignition essentially boils down to human action—impulse, emotion, pride, ambition, ideology, faith, fear or the pursuit of power. 

Figure 4 

Whether it’s:

• Mythic provocation (Helen of Troy)
• Territorial hunger (Lebensraum)
• Political culture (Bushido, Spartan honor)
• Ideological clash (nationalism, communism, democracy)
• Faith and doctrine (religious wars)
• Oppression and independence (colonial revolts) 

…each war is a man-made disaster, often more devastating than nature’s fiercest convulsions. (Figure 4) 

Again, history’s wars are rarely accidents of circumstance; they are the culmination of deliberate human choices, ambitions, and fears. Each cause—territorial, ideological, or psychological—reflects a particular configuration of human action under pressure 

2E. Thai-Cambodia Border Clash and Thai’s Domestic Policy Fissure 

Take the recent case of the Thai–Cambodia border clashes, which erupted on July 24, 2025, and lasted five days. The conflict resulted in 38 confirmed deaths, over 300,000 civilians displaced, and dozens injured. A U.S.–China–ASEAN-brokered ceasefire was reached on July 28 in Putrajaya, Malaysia, though violations were reported within days.

While tensions trace back to colonial-era boundary ambiguities—notably the Franco-Siamese Treaties of 1904 and 1907—the immediate trigger was political destabilization in Thailand. A leaked phone call between Prime Minister Paetongtarn Shinawatra and Khleang Huot, Deputy Governor of Phnom Penh, exposed internal rifts between Thailand’s civilian leadership and its military establishment. The fallout led to Paetongtarn’s ouster, which reportedly emboldened the Thai military, escalating border hostilities and complicating diplomatic restraint. 

This episode exemplifies how domestic political fractures—especially civil-military dissonance—can act as a proximate cause of war, even when historical grievances simmer in the background. 

Although the engagement occurred without the direct involvement of superpowers, the casualties, displacement, and property damage were almost comparable to those from a major earthquake. 

2F. Fatalities: Wars Eclipse Earthquakes 

But this is a mere tremor compared to the tectonic toll of modern wars. In the Russia–Ukraine conflict and the Israel–Palestine–Hezbollah–Iran escalation, aggregate casualties have surged into the tens of thousands, with entire cities reduced to rubble and economies hollowed out. 

Zooming out, the 20th century offers even starker metrics:

• World War I: ~20 million deaths
• World War II: ~60–85 million deaths (approximately 500,000 to 1 million Filipinos perished)
• Korean War: ~3 million deaths
• Vietnam War: ~2–3 million deaths

 These are not just numbers.  Wars inflict far greater devastation on society—its people, its social fabric, capital, financial and economic wellbeing—than most natural disasters. 

2G. Unknown Unknowns-Black Swan Event: The Final Trigger 

Former U.S. Defense Secretary Donald Rumsfeld, defending the absence of evidence linking Iraq to weapons of mass destruction, famously invoked the concept of “unknown unknowns”—the things we don’t know we don’t know. 

In many ways, Black Swan events fall under this same category. They share three defining traits: they are unpredictable, highly improbable, and extremely consequential—whether catastrophic or transformative. 

Part 3. Synthesis: Nature’s Convulsions vs. Man-Made Catastrophes 

The fault lies not in our stars, but in ourselves—Shakespeare (Julius Caesar) 

Geological cycles and seismic displacements will inevitably occur—whether tomorrow, next year, or within our lifetime. But despite their scientific veneer, no current technology can predict their timing or magnitude with precision. And when framed within historical context, their feared impact may be less apocalyptic than media portrayals suggest. 

Still, situational awareness and preparedness should remain a universal goal—to prevent one from becoming a collateral of what Nature or Providence may unleash. 

3A. The Human Trigger 

By contrast, wars are man-made disasters—often triggered not by grand strategy, but by accidents, miscalculations, and misinterpretations, all fueled by human frailties. The daily confrontations in the South China Sea could easily escalate into a bilateral kinetic engagement, like the Thai–Cambodia or India–Pakistan border clashes.

Should escalation occur—and if the Philippines invokes the 1951 Mutual Defense Treaty with the United States—the world could awaken to the unthinkable: a third world war. This is not hyperbole—it’s a structurally plausible outcome.

And this could happen anytime. As long as belligerence dominates bilateral policy, the spark could ignite today, tomorrow, next week, or a year from now. The extent of destruction remains deeply unknown—dependent on the nature and scale of warfare employed.

3B. The Shape of Future Wars and the Grey Swan

Unlike World War II, which pursued territorial conquest, modern warfare is more strategic than expansive. In the Russia–Ukraine war, occupation has largely focused on Donetsk and Luhansk —ethnically Russian regions—with limited push toward Kyiv. In contrast, the Israel–Middle East conflict may reflect ambitions for a Greater Israel, with broader territorial implications.

Yet the Philippine public remains benumbed—desensitized by repetition and diversion, dulled by inertia. This jaded reaction blinds us to escalation, even when its architecture is already in place.

It’s not a Black Swan—it’s a Grey Swan: known, possible, but broadly discounted. 

3C. War Economies and Systemic Fragility 

Meanwhile, internal economic fragilities mirror these geopolitical tensions.

Figure 5 

The war economies of Thailand and the Philippines have been among the worst-performing Asian stock markets in 2025, down -8.97% and -6.73% year-to-date, respectively (as of October 17). Though internal fragility remains the primary concern, this also suggests that geopolitical tensions have contributed to the erosion of investor confidence. 

Despite global equities reaching record highs amid easy-money policies and the weak dollar, these two “war economies” remain laggards. 

If liquidity tightens globally, could leaders resort to military conflict—a survival mechanism cloaked in patriotism— as a means to divert public attention from political economic entropy? 

That’s our Black Swan. 

War is conscious cruelty compounded over time—the most preventable catastrophe, yet the one that most often eclipses nature’s fiercest convulsions.

3D. Conclusion: The Shape of the Next Black Swan 

In the end, both earthquakes and wars spring from ruptures—one from the shifting of tectonic plates, the other from the collision of human wills. The former is inevitable, a law of Nature; the latter is avoidable, yet repeatedly chosen. 

One humbles man before forces beyond comprehension; the other exposes the peril of his own hubris. Between Providence and pride lies the fragile equilibrium of civilization. Whether the next Black Swan rises from the earth’s crust or from the depths of human ambition, its impact will test not our technology, but our wisdom—our ability to foresee, restrain, and prepare before the unthinkable unfolds.

 

How Market Manipulation in the Philippine PSE Magnifies the Risks of a "Black Swan" Event

  

Dubious practices, fraud and embezzlement are common during financial bubbles, which are usually created by central banks’ loose monetary policies and by a poor supervision of the financial sector—Dr. Marc Faber

 

In this issue

How Market Manipulation in the Philippine PSE Magnifies the Risks of a "Black Swan" Event

I. BSP Chief: Black Swans from Risky Investments Based on the Rosy Scenario

II. Parabolic ICT as the Single Benefactor of the March 21st Massive End-Session Pumps!

III. The Rotational Pump from ICT to the Financial Sector

IV. How Market Manipulation Amplifies Systemic Fragility

V. January-February 2024: PSEi 30’s Returns Outperform as Volume Slumped!

VI. Negative Market Breadth, Rising Risks of a Black Swan Event from Sustained Capital Consumption

 

How Market Manipulation in the Philippine PSE Magnifies the Risks of a "Black Swan" Event

 

The BSP Chief recently warned about "Black Swan" events resulting from the market's risky behavior. However, frequent pumps and dumps at the PSE could be examples of such events.

 

I. BSP Chief: Black Swans from Risky Investments Based on the Rosy Scenario

 

We'll open with an excerpt from a recent speech of the BSP Governor covering the publication of the 2023 Financial Stability Report (FSR) [bold added],

 

You have heard of "black swans" indicating highly unlikely surprises or "the butterfly effect" to describe how small things can lead to far-reaching consequences. These are the things we worry about. Indeed, financial market participants often make risky investments based on rosy scenarios. The more widely shared the scenario, the more dangerous it is. When something goes wrong in these scenarios, it sometimes leads to mass panic. There is a rush for the exits, causing massive investments to collapse… We remember the crisis, but we often forget the rosy scenario that led to it.  (Eli Remolona, 2023)

 

The default or mechanical response of almost every political authority or expert is to blame economic volatility on the marketplace.  But they hardly reveal the source of funding and incentives of market participants that lead to such 'market failures.'

 

Besides, abstract attributions like "make risky investments based on rosy scenarios" don't cause boom-bust cycles.  

 

Instead, the fountainhead of increased economic and financial fragility stems from a deepening of the politicization of the economy, channeled through policies that lead to the excesses in the aggregation of many variables like systemic overindebtedness, a massive misallocation of resources, intensive mispricing of markets, and hyperbolizing economic and financial conditions via inflated statistics.

 

If so, have authorities not been a focal point in this "rosy scenario" that breeds "black swan" events?

 

II. Parabolic ICT as the Single Benefactor of the March 21st Massive End-Session Pumps!

 

Let us help in identifying one avenue for a potential "contagion."

 

Though fragrantly evident to the public, the establishment remains remarkably taciturn to the relentless "rigging" of the Philippine equity benchmark, the PSEi 30.

Figure 1

 

An example is the dominance of pre-closing dumps and pumps (Marking the Close—MtC) in three of the week's five trading sessions. (Figure 1, topmost graph)

 

The aggregate volatility from these MtCs totaled about 1.95% of the weekly close of March 15th.  That's about double the .87% advance posted by the PSEi 30 this week (March 22nd).

 

To achieve their end-session target for the PSEi 30, the collaboration by index managers typically involves bidding up/selling down several top-tier issues (at least 5).

 

But Thursday (March 21st) signified a historical event.  The cabal of index managers directed their actions to the share prices of a single firm, ICTSI [PSE: ICT].

 

ICT segued into the 5-minute pre-closing float period up by 2.16%—only to reopen during the runoff-closing period with a shocking spike of 9.28%—a massive pump equivalent to 7.12%! (Figure 1, middle pane)

 

Ironically, there were only 119 trades conducted during the runoff period, with a single institutional broker accounting for 68% of the total!  Only about 16 brokers participated in the massive bid-up, some of which were retail. 

 

In short, a few participants "forced up" ICT share prices in the closing period!

 

Consequently, ICT's free float share of the market cap stunningly flew to an all-time high (ATH) of 9.22% last Thursday!  ICT toppled SMPH for the third-largest PSEi 30 firm! (Figure 1, lowest chart)

 

Because of the intensity of the ICT's advance, PSEi 30 resonated with it: it jumped by .9% to close the session by 1.55%! Incredible.

 

III. The Rotational Pump from ICT to the Financial Sector

 

The next day, though ICT gave up all Thursday's MtC gain and more, index managers rotated their support of the PSEi 30 by propping the financial components, which cushioned the PSEi 30s decline to only 1.17%.

Figure 2

 

The financial index not only gained by 3.34% WoW, but the "full" market share of the big three PSEi 30 banks surged to an unprecedented 18.5% last Friday! (Figure 2, topmost and middle diagrams)

 

As of March 21st, the top 5 market cap heavyweights (SM, BDO, ICT, SMPH, and BPI) accounted for a staggering record 50.98% share! (Figure 2, lowest image)

 

When accounting for the next five largest market caps, their cumulative share of the market increases to 73%!

 

That's right.  Only five to ten components drive the PSEi 30!

 

Beyond that, the mounting concentration of gains not only reflects the intention to artificially prop up the index, it also indicates INCREASED CONCENTRATION RISKS.

 

IV. How Market Manipulation Amplifies Systemic Fragility

 

Further, political policies fuel the distortive effects of market manipulation, as noted back in 2017: (bold original)

 

These growing incidences of vertical price movements have not been isolated from the progressing entropic developments at the PSEi as a result of massive manipulations.

 

Most will be rationalized from a demand shock—new information that alludes to G-R-O-W-T-H regardless of the validity of its premises.

 

In reality, both market manipulation and vertical prices are symptoms of the mortal sins of unabated credit expansion or currency debasement. (Prudent Investor, 2017)

 

Because only a few issues have fueled the upside performance of the headline index, the sustained shortfall in volume points to the unsustainability of its momentum. 

 

Yet, without an increase in disposable incomes or "real" savings, this requires a sustained and intensified increase in inflows from foreign savers.

 

As fund manager John Hussman explained, (bold mine)

 

All securities are essentially a way to trade current saving for a claim on future output. The value of all the securities in the economy derives from the claim on future output that this stock of real and intellectual capital can generate over time. During speculative bubbles and periods of malinvestment, saving is invested in unproductive projects that essentially result in unintended consumption rather than accumulation of productive assets. This means that the stock of outstanding securities is essentially “backed” by a smaller stock of productive capital to service those securities over time. (John Hussman, 2015)

Figure 3

 

Volume spikes rather than sustained increases have characterized the PSEi 30's race to 7,000. Ironically, the pesos’ mainboard volume remains below the Q3 levels! (Figure 3, upper chart)

 

Furthermore, market breadth has barely supported the .87% weekly advance by the PSEi 30 as the advance-decline distribution has been almost neutral for the PSE (490-491) and the PSEi components (15-14 and one unchanged).

 

Though the character of the 'rosy scenario' presented by the upswing of the PSEi 30 has been starkly different from a generalized boom phase of a full-fledged credit bubble as exemplified by India's case, this imperative to force upon a bull market cosmetically and inorganically shares a similar outcome: capital consumption that leads to a bubble bust. (Figure 3, lower visuals)

To sum it up, the intensifying vertical price actions of a few PSEi 30 heavyweights, backed by rotational pumps, are likely indications of mounting desperation to foster a bull market.  However, its inability to sustain such momentum could indicate buyer exhaustion and a potential (secular) reversal.

 

V. January-February 2024: PSEi 30’s Returns Outperform as Volume Slumped!

 

To expand our insights on the local market structure, let's analyze the first two months of PSE/PSEi 30's performance in 2024.

Figure 4

 

Sure enough, it's impressive that the PSEi 30 reached 6,900 in February, but the gross volume, which includes block trades and cross sales, tumbled to levels last seen in 2011!  (Figure 4, upper chart)

 

Put another way, while the PSEi 30 vaulted by 7.7% from end-December through February 2024 to shatter the decaying returns over the long term, this occurred in the face of sputtering volume.  That is, the PSE's gross volume plummeted 26.4% YoY! Amazing! (Figure 4, lower graph)

Figure 5

That's a measure of the general performance.  As a share of the total, the first two months saw a rebound in the volume of the holdings (2 years) and the property sector (from last year) compared to the slowing Financials (YoY).  (Figure 5, topmost diagram)

 

In contrast, the peso volume of industrials and services, which include the "Fly Me to the Moon" ICT, resumed their downward trek (in the last 2 and 3 years respectively).  Remarkable. (Figure 5, middle image)

 

The pecking order of peso volume by sector share in the first two months of 2024: Holdings, Industrials, Financials, Property, and Services. (Figure 5, lowest window)

Figure 6

 

Paradoxically, the financial index, which stormed towards its 2018 All-time high (ATH), saw its peso volume contract by 30.5% YoY! (Figure 6, upper chart)

 

Since the BSP's unprecedented rescue of the banking system in 2020, Financials have outperformed.

 

Specifically, the PSEi 30 banks have been responsible for most of the gains in the Financial Index. Apart from the ICT sector, rotational pumps into PSEi banks have contributed significantly to the PSEi 30's advances.

 

VI. Negative Market Breadth, Rising Risks of a Black Swan Event from Sustained Capital Consumption

 

It is not just volume but market breadth remains in stagnation.  Despite marginal improvements (from 2020), the advance-decline spread remained negative. (Figure 6, lower image)

 

The volume slump and poor market breadth reveal the lack of participation from the general public.

 

The genuine bull market climaxed or culminated in 2013, after which the rest of the index performance was primarily characterized by strategic maneuvers.

Figure 7

 

Let us unpack this.

 

The deficiency of the PSE’s trading volume didn't emerge out of a vacuum. These can be traced back to the diminishing liquidity in the banking system (expressed by the cash-to-deposits downtrend), which has, in part, been exacerbated by the swelling of the government’s deficit spending.  (Figure 7, top and middle graphs)

 

Bluntly put, diminishing volume is a symptom of capital consumption.

 

In the end, what have the authorities done to decrease the odds of an outbreak of (future) economic volatility or a "black swan" event resulting from (today's) market manipulation or "risky investments based on rosy scenarios?"

 

What will they do to diminish its impact?  

 

Do they even know? Have they been "asleep at the wheel?"

 

Or have 'risky investments' become too politically entrenched to perpetuate their refinancing and credit expansion to fund malinvestments, which have been peddled to the public under a statistically 'rosy scenario'? (Figure 7, lowest chart)

 

"Market failure," really?

___

References

 

Eli M Remolona, Governor of Bangko Sentral ng Pilipinas:  Message during the release of the 2023 Financial Stability Report, 13 February 2024, Bank of the International Settlements, March 22, 2024

 

Prudent Investor Newsletter, BW-SSO Price Actions and Market Manipulations Signify as Twin Symptoms of the Raging Credit Bubble! February 13, 2017

 

John P. Hussman, Ph.D Stock-Flow Accounting and the Coming $10 Trillion Loss in Paper Wealth Hussman Funds, April 6, 2015