Following Gokongwei, Ty Family Unloads $172 Million Worth of GTCAP shares!

Wow, billionaires look as if they are showing the way.

From the Inquirer:

THE TY family placed out $172 million worth of shares in conglomerate GT Capital Holdings, boosting stock market liquidity.

The shares were sold by the Tys’ Grand Titan Capital Holdings to institutional investors at P1,539 per share in an oversubscribed deal arranged by investment bank UBS.

The mere act of selling of the shares of the Ty's flagship firm signifies a revelation of their subjective choice. Such choice reflects on their priorities, preferences and values.

This apodictically means that the Ty family prioritizes cash rather than their shares.

What becomes subject to interpretation are the possible WHYS of the sale?

Was the sale merely a windfall which the family will spend for personal use? If so why such a huge amount? Wouldn't it be better to sell when in need, especially if share prices will continue to skyrocket?

And wouldn’t it be an irony considering the astounding 66% surge in eps growth by the GTCAP in the 1H of 2016, then why sell at all?

Or could it be perhaps that such magnificent eps growth had been more about accounting gymnastics, or income statement inflation mostly due to recent acquisitions, the Property of Friends, and MPIC, as with recent merger, Toyota Marina Bay and Toyota Cubao? And could it be that the said sale merely reflected on the what they might have thought as excessive valuations?

As with the $250 million JGS sales by the Gokongwei’s, it is very unlikely for any magnate/tycoon to admit that their shares are overvalued for the reasons that I have previously cited: for prestige, for collateral values (for loan purposes), for moneyness of their shares (for deals) and or for political capital purposes (for political deals).

With an estimated $4.6 billion in wealth, the patriarch George Ty has been ranked 421 in the world and fourth in the Philippines according to the Forbes.

So the sale would constitute around 3.7% of the Ty’s wealth.

 

Or could the Ty’s have been signaling ‘disciplinary actions’ to the speculative community that they will be sellers if prices continue to soar vertically.

Or could it have been that the Ty family sees developing uncertainty in the incumbent political economic climate for them to raise not only cash, but cash in USD holdings? Buyer/s must have either been foreigner/s or overseas based entity/entities as indicated by the PSE quote today. GTCAP stumbled by 4.07% today.

Yet has the proceeds of the sale been kept abroad? 

After all, the current administration has opened a new war front against ambiguously defined ‘oligarchs’.

Or could they have begun stashing cash as insurance against perceived risks?

Yes world billionaires have reportedly been hoarding cash.

From the CNBC:

The world's billionaires are holding more than $1.7 trillion in cash — the highest amount since one firm began recording the measure in 2010.

Because of what they perceive to be growing risks in the economy and world, the world's 2,473 billionaires are keeping 22.2 percent of their total net worth in cash, according to the Wealth-X Billionaire Census.

If this trend percolates here, then the Ty's and the Gokongwei's could be future sellers.

Whatever the reason/s, one thing has been clear, like the Gokongweis, the Ty’s has signaled preference for cash with the latest sale. 

And perhaps they could be sellers anew if share prices continue to behave irrationally.

History is in the making.

World Millionaires Parties on Central Bank Policies

I am not a fan of the political correct issue called “inequality”, whereby populist politics calls for political solution to redistribute wealth in order to make economic standings “equal”. 

This inequality issue for me is really nonsense. Simple reasons, there is no such thing as “equal” (e.g. even public schools’ rating of students have ranks). Second, political ways of solving inequality extrapolates to a shift in inequality from the markets to politics or from market inequality to political inequality. Wealth (or resource distribution) will be skewed towards those whom political patrons anoint as beneficiaries. So when you hear "it is not what you know but who you know", those are signs of politically based inequality.

For instance when Ben Bernanke, yet as a university professor wrote a “smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse”, which became a social policy, popularly known as the Bernanke/Greenspan PUT, this translates to an implicit subsidy to equity market owners, financed by the ordinary citizens. 

And since global central banks have embraced and assimilated US Federal Reserves’ policies of ZIRP and QEs that has inflated asset markets, these has increased “wealth” of mainly of equity (as well as other asset) owners around the world.

From the Wall Street Journal Real Time Economic Blog

Overall, the world’s wealth grew by 15% to $152 trillion, led by a 31% jump among countries in the Asia-Pacific region (excluding Japan) to $37 trillion. In North America, the world’s richest region, wealth grew by 16% to $50.3 trillion, thanks largely to strong returns in the stock market.

Globally, the number of millionaire households hit 16.3 million in 2013, a 19% rise from the previous year.

Millionaires in China have reportedly eclipsed Japan to place second behind the US.

The difference has been that growth in the millionaires of Chinese, instead of coming from equity markets, has been mostly a product of shadow banking.

The Chinese saw their portfolios swell as wealth in the country grew by a whopping 49% to $22 trillion last year. The report’s authors attributed that explosive rise to specialized financial products such as trusts — the amount of wealth in trusts rose 82% in 2013 — “reflecting the country’s rapidly expanding shadow-banking sector.”

While booming stock markets fueled wealth growth in many other countries, including the U.S., China’s investors experienced the opposite: Wealth in equities actually fell 6.8% on the year among Chinese.

Notice that inflated assets markets have been the basis of “wealth” which means they are artificial and depends on sustained central bank subsidies. This includes China’s shadow banking system.

And as I pointed out here, in the US booming stocks mostly benefit the elites.

The sad part is that while inflationary boom supports a few, when the bust comes most will get hurt.

In short, central bank policies have both serious externality and inequality issues.

World's Billionaires List: Indonesia Edges Out Japan

There are more billionaires now in Indonesia than in Japan

From Wall Street Journal

Forbes Indonesia’s latest list of the country’s richest people, released this week, sets its billionaire tally at a record 32 people and families, edging out Japan, which Forbes says is home to 28 billionaires. Last year Indonesia had 26 billionaires, according to Forbes’ calculations.

While the archipelago’s crowd of coal magnates was hit hard by a plunge in coal prices, the commodities collapse was more than offset by the growing wealth of the people behind the country’s top retail, media, banking, food and tobacco companies.

Many may read this as signs of relative prosperity in favor of Indonesia. Perhaps.

But the important question to ask is what has served main foundation for the ballooning wealth class? Has it been economic freedom, cronyism or monetary induced bubbles?

From the same article,

While a lack of public disclosure can make it difficult to estimate exact wealth, Indonesia’s bulging batch of billionaires shows that family fortunes have been largely protected across the archipelago even as most of the world struggles with a slowdown.

And though Indonesia’s billionaires club is still smaller than the ranks in China (more than 100 billionaires) and India (more than 50 billionaires), with less.

It is not clear what “family fortunes have been largely protected across the archipelago” really means. Cronyism perhaps?

Although, the Indonesian government appears to have adapted more business friendly policies, economic freedom has been substantially been improving since 2008 (Heritage Foundation)

Also, Indonesia has embarked on genuine fiscal reforms since the Asian crisis. 

Indonesia’s government debt to GDP ratio has been pared to only 25% from 67.8% in 2008.

On the other hand, Indonesia’s economy has likewise been experiencing a credit boom from easy money policies.

Domestic loans have picked up substantially over the recent years, but still have been significantly below the levels of the Asian crisis (both charts above from tradingeconomics.com)

Nevertheless, the methodology used to arrive at the respective wealth estimates are from stakes held by these billionaires of publicly listed companies and for non-publicly listed private firms, indirectly through comparisons with publicly listed contemporaries.

And from such perspective, we can see from the charts below why Indonesia has overtaken Japan.

Charts of Indonesia’s JKSE and Japan’s Nikkei from Chartsrus.com

Indonesia’s JKSE has been skyward compared to Japan’s seemingly perpetual stagnation post bubble bust of the early 90s 

The jury is out on whether Indonesia’s recent gains has emanated mostly from either increased productivity due to a freer economy or from monetary policy induced bubbles.

Admittedly, economies are complex such that three factors (market economy, cronyism and monetary bubbles) may simultaneously be in operation, the point is which among them is likely the bigger force or influence.

World’s Richest Women are Chinese Entrepreneurs

That’s according to the Hurun Rich List, where seven out of 10 of the world’s wealthiest self-made women are from mainland China, most of whom made their fortune from real estate and manufacturing

According to Finance Asia (table theirs too) [bold mine]

It is not surprising that most of these women made their fortune from real estate, the country’s most profitable industry, and are headquartered in Guangdong, the cradle of China’s entrepreneurial spirit.

Zhang Xin, chief executive of Soho China, has said that Chinese women enjoy many freedoms and opportunities in the country’s private business sector — more so than their foreign counterparts.

China’s dominance in the top 10 world’s wealthiest women list seem to coincide with the gender distribution in their domestic workforce, where China ranks 3rd in Asia in terms  of women managers, and ranks, second in the world female labor force participation rate according to table from the Economist.

In the world of economic freedom, gender distribution (politically coded as “inequality”) barely becomes an issue as “freedoms and opportunities” are democratized. 

Declining Fatalities of Natural Disasters

This should be another good news; despite the many accounts of natural disasters, the overall impact has been diminishing.

Writes the Economist, (bold emphasis mine)

THE world has succeeded in making natural disasters less deadly. Annual death tolls are heavily influenced by outliers, such as Haiti’s earthquake in 2010 (which killed more than 200,000) or the Bangladeshi cyclones in 1970 (300,000). But, adjusted for the Earth’s growing population, the trend in death rates is clearly downward. Economic costs, though, are rising as people and industrial activity cluster in disaster-prone areas such as river deltas and earthquake fault lines. The world’s industrial supply chains were only just recovering from Japan’s earthquake and tsunami in March when a natural disaster severed them again in October. The deluge in Thailand cost $40 billion, the most expensive disaster in the country’s history. J.P. Morgan estimates that it set back global industrial production by 2.5%. Five of the ten costliest, in terms of money rather than lives, were in the past four years. Munich Re, a reinsurer, reckons their economic costs were $378 billion last year, breaking the previous record of $262 billion in 2005 (in constant 2011 dollars). Besides the Japanese and Thai calamities, New Zealand suffered an earthquake, Australia and China floods, and America a cocktail of hurricanes, tornadoes, wildfires and floods. Barack Obama issued a record 99 “major disaster declarations” in 2011.

Yet the Economist has been reticent about the cause of the accounts of diminishing death toll of natural disasters: Rising global wealth.

Google Public Data

As Professor Christopher Westley writes,

the best protection against natural disasters is not an expansion of the public sector on an international basis, but wealth creation. It is no mistake that natural disasters, which are quite equitable in distribution between rich and poor countries, are more devastating to the poor than the rich. The establishment of a thriving private sector in Sri Lanka, India, and Indonesia is crucial for a quality of life to develop there that can withstand earthquakes and their aftermath as well as does the California coast.

Higher quality or standards of living allows people to take on more protection against prospective calamities.