An inflation tends to demoralize those who gain by it as
well as those who lose by it. They become used to “unearned increment.” They
want to hold on to their relative gains. Those who have made money from
speculation prefer to continue this way of making money to the former method of
working for it…The trend in an inflation is toward less work and production,
more speculation and gambling—Henry Hazlitt
In this issue:
The
Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble
I. Why Our Prescient
Warning? Seven Disturbing Parallels
II. One: Gaming at the
Core
III. Two: Distortions: Market
Dominance and Turnover
IV. Three: Post-Crisis
Timing
V. Four: Inflation and the
Illusion of Prosperity
VI. Five: Prohibition, the
Satirical Theater of Morality and Potential Political Controversies
VII. Six: The South Sea
Parallel
VIII. Seven: Bull Traps
and Secular Cycles
IX. Conclusion: Bubble
Cycles: The Rhyming of History
The Ghost of BW
Resources: The Bursting of the Philippine Gaming Stock Bubble
From BW Resources to PLUS and BLOOM: The Anatomy of a
Gaming Stock Market Bubble Reborn, 7 disturbing parallels
I. Why Our Prescient
Warning? Seven Disturbing Parallels
At the peak of the euphoria surrounding the Philippine
gambling bubble, I issued a subtle warning via tweet (x.com post):
(Figure 1)
Figure 1
"Strange fascination with gaming bubbles. Has the
Philippine financial community forgotten the BW Resources bubble, w/c soared in
a bear market's 'bull-trap' phase & crashed in 1999, exposing
unsustainability & 'manipulation?' Learn from history—recurring bubbles in
market cycles"
Certainly, 2025 is not 1999. The economy, financial
architecture, and technological landscape have evolved. The composition of the
Phisix—now the PSEi 30—has changed. The circumstances behind the BW scandal
were unique.
Despite the passage of time and evolution of market
instruments, a troubling déjà vu grips the Philippine financial landscape. The
current gaming bubble echoes the BW Resources scandal with unsettling
fidelity—both in structure and in consequence.
Below are seven disturbing parallels that merit
scrutiny, not dismissal.
II. One: Gaming at the
Core
BW Resources began as an online bingo firm with a
nationwide franchise. It was, fundamentally, a gaming enterprise.
Today’s speculative darlings—Digiplus Interactive
Corporation [PSE: PLUS] and Bloomberry Resorts Corporation [PSE: BLOOM]—are
likewise gaming firms, riding a digital demand boom.
Figure 2
PLUS has enjoyed a windfall: retail
sales surged 181% (YOY) year-on-year in 2024, while net income growth
vaulted 207%. In Q1 2025, net income soared 110% to Php 4.2 billion. (Figure 2,
topmost window)
Riding on the coattails of PLUS, BLOOM—a relative
newcomer to online gaming—launched
its digital platform in April, coinciding with a sharp rally in its share
price. The timing fueled market excitement, further amplifying speculative
fervor toward the sector.
III. Two: Distortions:
Market Dominance and Turnover
BW Resources once commanded a disproportionate share of
market turnover. (Figure 2, middle graph)
At its peak, its market cap eclipsed stalwarts like San
Miguel and Ayala Corporation (Hamlin, 2000).
In mid-June 2025, PLUS and BLOOM’s combined turnover
reached over 20% of the mainboard. (Figure 2, lowest image)
As the bubble began to deflate, their aggregate volume
still accounted for 16.9% of June’s total.
The collapse saw a further explosion in turnover: in June,
PLUS plunged 48.15%, BLOOM fell 17.2%, and their combined turnover share spiked
to 22.2%. PLUS alone captured 17.8% of weekly volume—33.3% on Friday alone!
Astounding.
The stunning magnitude of PLUS's volume share—a firm
which used to be on the sidelines—suggests that this represents a corporate-specific
boom-bust episode driven not by savings but by leverage.
Remember that the banking system's credit portfolio
stands at an all-time high, mostly powered by consumer credit.
The spike in volume as PLUS shares collapsed may indicate
‘margin calls’ or the selling of other PSE-listed shares to bolster collateral
backing leveraged PLUS positions. This could explain the PSEi 30's 1.13% drop
last Friday.
IV. Three: Post-Crisis
Timing
Figure 3
BW Resources peaked and imploded in 1999, two years after
the Asian Financial Crisis (AFC), when GDP contracted by 0.51% in 1998. (Figure
3, upper chart)
The current bubble climaxed four years after the
pandemic-induced recession of 2020, when GDP shrank by 9.6%.
V. Four: Inflation and
the Illusion of Prosperity
The BW Scandal was a product of easy money-fueled
inflation.
Since peaking at 12.5% in 1994, the CPI headed downhill
until the 9.4% spike in 1998, belatedly brought about by the AFC. The CPI
dropped significantly to 6.1% in 1999 as the BW scandal unfolded.
Similarly, CPI rose from 3.9% in 2021 to 6% in 2023, then
plummeted to 3.2% in 2024.
As the great economist Henry Hazlitt noted,
"A vital function of the free market is to penalize
inefficiency and misjudgment and to reward efficiency and good judgment. By
distorting economic calculations and creating illusory profits, inflation will
destroy this function. Because nearly everybody will seem to prosper, there
will be all sorts of maladjustments and investments in the wrong lines. Honest
work and sound production will tend to give way to speculation and gambling.
There will be a deterioration in the quality of goods and services and in the
real standard of living" (Hazlitt, 1969). [bold added]
As Hazlitt warned, inflation distorts economic
calculation, rewards speculation over production, and erodes real living
standards. Despite disinflation, the purchasing power of the common tao
continues to decline.
Elevated self-rated
poverty and hunger
suggest a deteriorating standard of living. (Figure 3, middle and lowest panes)
As a side note—and quite ironically—despite the falling
rate of CPI, sentiment metrics such as self-rated poverty and hunger continue
to trend upward, even in the face of recent declines. Consider this: the current
environment operates under an easy money regime that has buoyed all-time highs
in fiscal stimulus, near-record employment, unprecedented public debt,
expanding bank credit, and systemic leverage. But what happens if this
constellation of highs begins to unravel?
Many turn to gambling not for leisure, but as a
desperate attempt to bridge income gaps, service debt, and or as a coping
mechanism—a form of psychological escapism from personal financial straits.
In this prism, rising gaming revenues hardly represent
economic progress, but rather a transfer from the vulnerable public to the
house casino.
VI. Five: Prohibition, the
Satirical Theater of Morality and Potential Political Controversies
The implosion of the BW Resources stock market bubble
effectively opened a Pandora’s Box of political ramifications. It exposed
systemic corruption, egregious stock market manipulation, and other conflicts
of interest with connections reaching the highest echelons of power (Pascual
and Lim, 2022).
Following the contemporary political assault on
Philippine Offshore Gaming Operators (POGO), political evangelists have
opportunistically piggybacked on this sentiment, advocating for increasingly
vocal and deeper prohibitions anchored on the supposed social sanctity
or righteousness of a total ban on digital gambling.
Yet the crackdown on POGOs appears entangled in deeper
geopolitical currents—linked to Chinese interests under the previous
administration and potentially reflecting the broader US–China hegemonic
rivalry, made manifest through diverging diplomatic relations between alternating
political regimes in the Philippines.
Crucially, in a populist climate framed by
social-democratic ideals, the magnitude of state intervention often becomes
a currency of political capital—the larger the crackdown, the louder its
resonance among voters.
History repeats: the public once clamored to ban jueteng,
which helped trigger People Power II
and the ouster of President Joseph E. Estrada. Eventually, the state legalized it
through STL under PCSO.
Wikipedia notes: "One of the suggested reasons for
legalization was to eliminate repeated corruption scandals... It has been
compared to the tribulations in the United States regarding their prohibition
of alcohol."
Or rather, legalization signified the ‘nationalization’
of what was once a fragmented, decentralized, and implicitly local government (LGU)
controlled shadow economy—effectively converting informal vice into formal
state enterprise.
In the same vein, one might ask: what became of the Philippine drug war,
"Operation Tokhang"?
Aside from the escalating calls for prohibition, will
other political controversies emerge from this bubble bust?
If history is a reliable compass, financial
distortions often leave behind trails of corruption, regulatory compromise, and
partisan leverage. The unraveling may reveal ties between speculative
fervor and institutional patronage—suggesting that what began as financial
exuberance could metastasize into yet another political saga. When markets
deflate, the silence seldom lasts.
Echoing the BW scandal, will malfeasance reemerge?
As economic historian Charles Kindleberger once warned: "The propensity
to swindle grows parallel with the propensity to speculate during a boom; the
implosion of an asset price bubble always leads to the discovery of frauds and
swindles" (Kindleberger & Aliber 2005)
VII. Six: The South Sea
Parallel
Figure 4
While intense volume spikes amid a share collapse are
associated with 'capitulation'
or a theoretical ‘bottom,’ we harbor doubt that this is the case.
From our humble perspective, whether a bounce occurs or
not, the Philippine gaming bubble may have likely been pricked.
PLUS’ chart, born of BSP’s easing cycle, evokes the South
Sea Bubble of 1720—a spectacle of leverage, speculation, and political
complicity. (Figure 4, upper and lower graphs)
The South Sea Bubble was a major financial crisis that
shook Britain in 1720, driven by wild speculation in the South Sea Company. The
company had been granted a monopoly on trade with Spanish South America and
took on a central role in managing the national debt by converting the King’s
personal debt into the nation’s debt. Investors were drawn in by promises
of immense profits. The company fueled the frenzy by allowing shareholders
to borrow against their own South Sea stock as collateral, encouraging
dangerous levels of leverage. The bubble was also part of a broader shift
toward modern finance, including the creation of paper money and the
rise of institutions like the Bank of England, which was established in 1694 to
help manage government borrowing and stabilize the financial system. When
confidence collapsed, share prices crashed, collateral became worthless, and
forced liquidations deepened the ruin. The episode exposed corruption at
the highest levels of government and business, leading to political fallout
and reforms in financial regulation. (Cwik,
2012)
Isaac
Newton, emblematic of intellectual prowess, became entangled in the bubble.
After initially profiting, he reinvested heavily—and ultimately went broke.
It’s often said the experience prompted him to declare: "I can calculate
the motions of the heavenly bodies, but not the madness of people." (chart
from Dr. Marc Faber)
Ironically, Newton’s third
law of motion—"for every action, there is an equal and opposite
reaction"—finds metaphorical resonance here: South Sea shares returned to
their starting point, as did the illusions of prosperity they once inspired.
VIII. Seven: Bull Traps
and Secular Cycles
Figure 5
The BW scandal unfolded and climaxed in 1999 during a "bull
trap" in a secular bear market. Once exposed, the market plunged until its
2002 trough—where the next bull cycle began. (Figure 5, upper chart)
Today, the bear market persists. A “bull trap” rally is
being engineered through easy money, fiscal stimulus, market interventions, and
statistical optics—all framed within a carefully curated Overton Window,
reminiscent of the ‘easing cycle’ powered "bull trap" of Q3 2024, as exhibited by
prevailing media headlines. (links here, here
and here)
(Figure 5, lower diagram, Figure 6, media images)
Figure 6
IX. Conclusion: Bubble
Cycles: The Rhyming of History
The bursting of the Philippine gaming bubble
represents more than a mere market correction—it embodies the cyclical nature
of speculative excess that has plagued financial markets throughout
history.
The parallels between today's gaming bubble and the BW
Resources scandal of 1999 are symptomatic of deeper structural patterns
in market psychology, monetary policy and political misdeeds and imbroglios.
As Mark Twain allegedly observed, "History doesn't
repeat itself, but it often rhymes." Beneath the veneer of technological
advancement and regulatory sophistication, the fundamental drivers of
speculation—easy money, leverage, political interventions and human
greed—remain unchanged.
For those who understand the pattern, the current gaming
bubble's burst may indeed signal the end of the artificial "bull trap"
and the resumption of the secular bear market that never truly ended.
In the end, the house always wins—not just in
gaming, but in the grander casino of speculative markets where bubbles, once
formed, must eventually burst.
Yet, the silence after bubbles burst is rarely
permanent. It’s often the prelude to scapegoating, reform, or
reinvention—sometimes all three.
___
References
Henry Hazlitt, Comments on Inflation,
May 1960 Fee.org
Kevin Hamlin, Confidence
Game, Institutional Investor, August 1, 2000
CLARENCE PASCUAL AND JOSEPH LIM Corruption
and Weak Markets: The BW Resources Stock Market Scam, March 2022 UP Center
for Integrative and Development Studies, cids.up.edu. ph
Henry Hazlitt, Man vs. The
Welfare State p. 133 Arlington House, 1969, Mises.org
Wikipedia, Jueteng
Kindleberger, Charles P., and Robert Z. Aliber. Manias, Panics, and Crashes: A
History of Financial Crises. 5th ed., Palgrave Macmillan, 2005. Chapter
9.
Paul F. Cwik, The South Sea Bubble,
April 3, 2012, Mises.org