As an Asian bull, I noted that the ongoing financial integration will boost valuations aside from the activities in the regional corporate arena.
Go no further, the boom is yet unraveling.
The art of economics consists in looking not merely at the immediate hut at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups—Henry Hazlitt
As an Asian bull, I noted that the ongoing financial integration will boost valuations aside from the activities in the regional corporate arena.
Go no further, the boom is yet unraveling.
Wisdom of Money imparts a very important message not just on spending but on investing habits, quoting them verbatim...
Wisdom of Money: The Way You Think Dictates Your Spending Habits
Prosperity thinking can be defined as a trusting attitude that things will work out. It is an optimistic state of mind, and an empowered orientation toward money. Prosperity thinking means aligning our beliefs, attitudes, expectations, goals and behaviors toward realistic levels of abundance, confidence and gain. It increases financial and personal self-esteem and assists in using our feelings and intuition to deal with money more successfully.
Poverty thinking, on the other hand, is a mistrustful state of mind that says things will not work out. It embodies pessimism, fear, and a passive relationship with money. A poverty thinker aligns beliefs, attitudes, expectations, goals and behaviors toward unrealistic levels of scarcity, fear, and loss. It diminishes our financial and personal self-esteem and decreases confidence in handling money. Such messages can cause us to distort how we perceive an event and explain why we react irrationally. Almost everyone, including highly wealthy people, is a victim of poverty thinking to a certain degree.
Prosperity and poverty thinking are two important concepts for understanding the psychology of money. Studying various spending personalities and behavioral patterns provide us with an awareness for making smarter financial decisions of our own. Because the mind takes precedence over our actions, to think and feel more prosperous creates new opportunities for experiencing financial freedom.
``The game is always changing and evolving, and it pays to pay attention to new theories. The bottom line is to always be open-minded, to try and improve the way you do things." -Brian Cashman (GM, NY Yankees)
Figure 3: Phisix: Knockin’ on Heaven’s Door?
Of course with the momentum going in one’s favor, would one even care to listen to what may derail it? As we have previously noted, the average investors normally extrapolate the immediate past as the likely path of the future.
I’d like to point out to you that the ongoing activities in the US Treasuries market have not been singing hallelujahs as the consensus have it. In fact, if one looks at the present activities, the rapid decline of the 10 year bond yields point towards, expectations by bond investors of an ‘accelerated’ mark down in the US economic growth cycle and inflation expectations as shown in figure 4.
Figure 4: Stockcharts.com: Bond Yields Suggests Big Slowdown Ahead
Figure 5: Stockcharts.com: Knockin’ on Heavens Door or Facing Hell?
If these
On the other hand, if the prospective slowdown in the
``The coup has also highlighted some of the fragility inherent in Thailand's social fabric: so very much of the nation's unity and order rests on the shoulders of one remarkable man, His Majesty, the King.”-Andrew T. Foster, Director of Research, Portfolio Manager, Matthews International Capital Management, LLC
One major distinguishing factor that has so far contributed to the triumph of the changeover has been that the military group, who were seen adorned with yellow ribbons meant to demonstrate their loyalty to
Many pundits have thrown their opinions as to the possible repercussions. A surprisingly big number of analysts, mostly from foreign institutions-gleaned through Bloomberg’s interviews, have said that this opportunity could signify a “screaming buy” given that the present political impasse would be disentangled given the makeover. Some like those from Morgan Stanley downgraded their Thai outlook.
In the past I have noted that domestic volatility have markedly ebbed as global markets have slowly integrated...
Figure 1. Yahoo: US/THB; stockcharts.com
To give it a more balanced perspective, Asian currencies have been largely down led by
For as long as the Thai incident would remain contained, orderly and peaceful, we are unlikely to see a contagion effect towards other the ASEAN nations which I view as rather low impact low probability event. In contrast to the Asian Financial Crisis in 1997, where structural infirmities such as pegged currencies, massive deficits and mountain loads of external or dollar denominated debts gave way to simultaneous capital flight, today’s ASEAN economies appeared to have learned from the past and have adopted a more flexible stance.
As for General Sonthi Boonyaratkalin leader of the coup, like the JRR Tolkien masterpiece the Lord of the Rings, we will see if he will be consumed by the power he arrogated upon himself (what I call “personality based politics”) or indeed stay loyal to the cause of the King and permit for a transition government. By the way, coup has been a way of life for the Thais; this has been the 18th during the past 60 years for the Land of the Smiles!
Finally, I’d like to make a short comment on the observations of a very high profile contemporary, who made a ‘rationalization’ that Thursday’s decline at the Phisix had been due to the Thai coup. Our expert analyst simply parroted what the average investor would have thought. However, being an analyst, I guess I’d be responsible enough to point out that in spite of the impression of so-called “foreign-investors-pulling-out-of-ASEAN” due to the Thai development, internal market data showed that foreign buying heavily supported the Phisix in nominal and in broad market terms, which simply belies this claim. Further, Ayala insiders or the Zobel group represented by MERMAC sold 6.9% or Php 10.56 billion worth of AC shares to a foreign group on a special block sale also during that fateful day. So listen to your high profile analyst, who is after all, not after the truth, but for publicity (smiles!).
``With so much complacency around and with such a high propensity to speculate in just about everything among all classes of investors, a nice crash should not entirely be ruled out.”- Dr. Marc Faber
Yet evidences continue to mount in support of my concerns. Recently, I have assigned the weaknesses seen in the broad spectrum of energy prices to dampening demand in the
Figure 1: Northern Trust: Declining Energy Related Imports
Figure 2: Fullermoney.com Oil’s Countertrend risk since 2001
Analyst Barry Ritholtz echoes a similar view on the apparent corrosion of consumer demand (emphasis mine), ``In the past 16 Federal Reserve tightening cycles, there has been one true soft landing in 1994. I continue to look at that not as impossible, but as a low probability event.... My largest present concern is oil and other commodity prices. It's no coincidence that gas, oil, gold, aluminum and copper all have dropped at the same time. I read that as signs of a global slowing in demand.”
At the same time, we likewise hear parallel sentiments and warnings from the head honchos of the multilateral agency the IMF as Mr. Rodrigo Rato (Managing Director) and Mr. Raghuram Rajan (chief economist).
I watched Mr. Rajan’s interview at Bloomberg where he commented that the world economies have been growing strongly supported by emerging domestic demand. As an example, private demand has made up the bulk of
Figure 4 Yardeni.com: Moody’s Corporate spreads
Figure 5: Bank of International Settlements: Default rates and CDS markets
Figure 6: PSE and Dow Jones World Index
Governments will do anything as to achieve its short term goals usually with long term unintended consequences. When governments distort markets we know that the effect is likely to be short-term. Moreover, governments have had ignoble track records in the markets. One can just be reminded of
In the local market, recently one sector had been a steady beneficiary of foreign portfolio inflows over the past few weeks. It appears that an ongoing rotation abroad has also found a similar trend here.
We see similar upside momentum over at the Dow Jones Emerging Market Telecoms benchmark as well as a spike in PLDT shares (lower window) traded in
Fundamentally, if one considers subscriber growth as basis for projecting revenue growth, I find that the fantastic growth clip for telecom stocks as having peaked out. However, as I have noted the hunt for yields may continue and the formerly out-of-flavor telecom issues abroad may equally find a spillover at local issues.
If the bullish momentum towards these issues continues to lead the market over the interim, one may consider surfing them.
The telecom sector is one areas of the controversial “digital divide” said to be the restricted to the realm of the “haves” over the “have-nots”. According to the International Telecommunications Union (ITU), ``Over the last 10 years, the digital divide has been shrinking in terms of numbers of fixed phone lines, mobile subscribers, and Internet users.”
Figure 8: ITU: Closing the Digital Divide
In the
``A man can fail, but he isn't a failure until he blames someone else." J. Paul Getty, industrialist
Figure 3 stockcharts.com: US dollar breaks to the Upside!
According to Morgan Stanley’s Currency analyst Stephen Jen, ``Investor risk-reduction could ‘turbo-charge’ the dollar and, ironically, lead to dollar strength…we think that the dollar could actually rally in a deep recession.” In the present setting, a strong US dollar supported by rallying bonds amplifies the case of a severity of a potential hard landing.
Figure 5: stockcharts.com: WTIC Breaksdown!
Figure 6: stockcharts.com: Gold breaking down too?
However, over the long run, I remain bullish on gold even as present trends appear not to be supportive of its short-term case. Anyway, no trend goes on a straight line.
For the moment it looks like that the deflationist camp is getting ready to open the champagne bottles.
I’d like to also point out that the Philippine Stock Exchange (PSE) recently issued a word of caution to the public on what appears to be growing speculative activities seen in the broad market which I find as quite bizarre or if not ludicrous. According to the PSE, ``Based on the recent two (2) months of trade data initially reviewed, there are nineteen (19) listed companies that have increased its share price ranging from 30% up to 860%, breaching trading bands under the PSE Rules. Total traded volume and value for these stocks were 7B shares and Php2B, respectively, and amount to 10% of the total value of PSEi for the same period. Approximately, 60% of active Trading Participants traded at least one (1) of the stocks in review and 24% traded three (3) or more. These stocks also consistently reached 50% a number of times within the same review period and some for two (2) to three (3) consecutive days. All these activities happen amidst consistent general declaration of the issuers to have no known basis for the steady climb of its share prices.”
Figure 2: McKinsey Quarterly: Asian Capital Markets
Second, the Philippine currency continued to outshine the region as it surged to a fresh four year high milestone at 50.25 last Wednesday, but closed at 50.49 to a US dollar or .48% higher over the week. Economic growth and portfolio inflows had been attributed to its recent activities, according to Bloomberg’s Clarissa Tan, ``The Philippine economy grew the most in the second quarter in a year, while growth in exports was the quickest in six years. Money from abroad flowing into the nation's stocks helped push the benchmark share index to its highest close this week in more than three months.”
Figure 1: Daily Wealth/Stockcharts.com: Large Caps Outperforming
``Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage."-Niccolo Machiavelli
``The market doesn’t reward fools for long.” — Timothy Vick, author of How to Pick Stocks Like Warren Buffett
We should not forget that from the second quarter of the year the Phisix, and Global markets have trailed the movements of key
Figure 4: stockcharts.com: What slowdown? Volatility Index shows complacency
Which brings us to the seasonality factor as shown in Figure 5.
Figure 5: Chartoftheday.com: Worst month of the Year
Figure 6: stockcharts.com: End of Commodity Bullmarket?
Figure 7: stockcharts.com: HUI-Gold bullish technicals
The Philippine Peso raced to a 4-year high following a successful breach of the psychological threshold level at 51. The local currency closed 1.26% stronger at 50.735 per US dollar on Friday and was
Naturally, the strength of the Peso has been likewise reflected in the activities of the local financial markets. As previously shown Philippine sovereign bonds had been imbued with significant portfolio flows as to see its nominal yields decline. Similarly, the local equity market as measured by the Philippine composite index or the Phisix has been on an upswing following last May’s global “risk aversion” scare.
As I have noted in numerous occasions, at the margins it is capital flows to the local financial markets that has lifted the local currency more than the remittances, economic growth and other reasons cited by mainstream experts. And importantly, such flows have been dictated by the developments in the global financial arena. For instance, since the world financial markets has anticipated the US Federal Reserve to hold in abeyance its program of raising interest rates, the US dollar has resumed its secular decline against most Asian currencies and against currencies of its major trading partners.
Let me remind you that in today’s dynamics, the financial realm drive the real economy and not the other way around. You just have to take into account the ocean or seemingly boundless stream of liquidity emanating from monetary and non-monetary sources to support the exchange of widgets and services. In short, I am strictly referring to inflation. While global central banks appear to be in a tightening mode they have been doing it perfunctorily. The humongous build up of aggregate liabilities will require MORE dosages of liquidity injection to support the present framework, otherwise risk a financial system meltdown. Would the world’s political leadership allow this?
Further, you want to talk about a major source of income inequality? Look no further than the inflationary tendencies of the world’s collective monetary authorities. Inflation benefits those who FIRST access the newly issued money who can buy at yesterday’s prices while the late recipients (the public) buys at today’s higher prices. Guess who are the primary beneficiaries of “money created from thin air”? The Government, particularly the Politicians and their executives, and the bankers. For the former, it is of no wonder why they fight with tooth and nail to assume the jurisdiction of, and staunchly justify the Spending Other People’s Money (SOPM). Yet, based on historical accounts not just domestically but worldwide, in a very significant degree, SOPM programs have led to massive distortions and imbalances and has greatly reduced standards of living.
Figure 1: The Phisix (Red) Gets Flanking Support From Strengthening Peso (black)
Figure 2 Surging Number of issues traded
Figure 3 from stockcharts.com: What Slowdown? Dow Jones World Index (left), Dow Jones Industrial Averages (right)