Operation Defend the Maginot Line PSEi 8,000

To repeat, history is in the making, not because of the headline index, but because of extent of grotesque valuations reached, the intensive mispricing, the sheer degree of recklessness as expressed by vertical prices, the total evisceration of risks, the extreme or lopsided scale of misperceptions which are basically manifestations of hardened convictions of a one way street or the delusional attainment of paradise, and importantly, the massive and brazen manipulations of stock prices and stock price index.

More evidence of the said dynamic unfolding in today’s and yesterday’s session 

I also noted last weekend

8,100 has not only been the magical number, PSEi 8,000 has also served as the bull’s “Maginot Line”—a line that must be held again at all costs…

Thereby each case of price weakening/ profit taking has been followed by a massive engineered price spikes—mostly channeled through post lunch afternoon delight and or marking the close sessions.

 

Bulls and the market manipulators were apparently caught by a surprise selldown yesterday, August 3 .

So aside from a small late afternoon delight pump, price fixers engaged in a minor “mark the close” to mitigate the day’s losses to just 1.86% from about the trough of around 2.33%. (right)

Today August 4. Following a strong start which subsided by lunch break, the PSEi saw a late afternoon-delight pump which climaxed with another stupendous mark the close. The end session pump contributed to an amazing 34% of the day’s 1.14% surge!

Remember, Operation Maginot Line 8,000 means that 8,000 MUST be defended at ALL cost! And to attain this means that NO profit taking allowed. That's because profit taking might bring about a crash which has traumatized the consensus.

And where profit taking occurs, such will be countered with a well-coordinated and synchronized frenzied-vertical pump. This means that the PSEi can only go up! A one direction trade!

Understand again that the headline index, which constitutes 30 member firms, cannot just move up without several big market cap issues being pushed simultaneously or concertedly.

 

So here are the biggest contributors to the last minute or marking the close pump. The above is aside from intraday pumps mostly in the afternoon.

Moreover, last Monday I also wrote:

By tomorrow, TEL’s losses would have been forgotten. And because losses are not to be allowed, violent pumping will be the mechanical response.

 

Bullseye again.

Because PLDT has been BIGGEST drag to the grand ambitions to break April 2015 record, it MUST pushed up regardless of fundamentals.  

So the -33% decline in profit growth in 2Q 2016, which represents as an extension to 2015’s 35.34% eps growth crash, equals a 4.56% PUMP today!

More proof how prices have totally decoupled with reality!

This only reaffirms why milestone event-process, which seems to be a fusion of 1997 (ultra high levels of valuations) and 2007 (vertical pumping), is happening right here, right now.

PLDT’s 2Q and 1H Earnings GrowthTumbled 30+%!

After a series of frantic vertical pump and push, it turns out that the 4G (TEL-GLO) monopoly was required to cloak on what turned out to be another collapse in PLDT’s 2Q and 1H earnings.

 

From PLDT’s disclosure today 

 

Consolidated Core Income for the period amounted to Php17.7 billion, 6% lower year on year, as a Php4.8 billion decline in EBITDA was moderated by the Php7.4 billion net gain from the sale of the Company’s 25% stake in Beacon Electric Assets Holdings, Inc. Reported Net Income reached Php12.5 billion, 33% lower than the previous year, on account of a further provision against our investment in Rocket Internet.

Losses would have even been larger had it not been due to the “sale of the Company’s 25% stake in Beacon Electric Assets Holdings”. The Beacon sale was reported at the other income segment. From PLDT’s 2nd quarter report: “(i) higher other income – net by Php 4,338 million due to higher gain on sale of Beacon shares by PCEV in 2016 as against the gain on sale of Meralco shares by Beacon in 2015” 

With the Beacon sale included in the pretax income, income growth suffered a reduction of 29.13% in 1H and 31.44% in 2Q. However excluding Beacon, growth rate losses would swelled to an astounding 47.1% and 67.84% respectively!

While the recognized impairments of PLDT’s Rocket internet investments of Php 5.381 billion contributed to the dismal performance, the bigger issue has been problems at the “core” or PLDT’s business model.

 

Poor topline performance has signified a toxic mix with surging financing costs.

PLDT’s topline has been in stagnation for the more than 3 years. Worst, during the past 2 years, the decay in gross revenues have become pronounced. This can be seen above where PLDT’s NGDP have flatlined or has drifted at zero or even produced negative numbers.

And this comes as financing costs has ballooned 23.26% in the 1H and 29.53% in 2Q in 2016.

So Beacon had to be sold to partly offset the Rocket impairment, thereby cushion the core issue of a profit squeeze from declining topline that had been compounded by higher debt servicing costs (aside from expenses)

PLDT reported that net debt was $2.7 billion in the 2Q 2016, compared to $2.3 billion in 2015 and $1.8 billion in 2014, for a growth rate of 17.4% in 2016 and 28% in 2015.

This shows that the firms's debt has been growing faster than the topline or even earnings.

The US dollar segment of 2016 loans was 37% as against 48% and 44% in 2015 and in 2014. This exposes on PLDT’s dollar short position or sensitivity to currency risks, although the largest telco firm says that “only US$300 million or 9% of the total debt is unhedged”.

At the end of day, this shows why PLDT and GLO have banded together with GLO to forge a 4G monopoly. Yet as I pointed out, 4G will be no elixir, especially if textbook problems of monopolistic operations come to the fore.

Moreover, 4G better come out soon because the sustained decrement of income might eventually exacerbate on PLDT’s increasingly fragile financial conditions

 

PLDT was dumped by 8.15% today.

Nonetheless index managers ensured that PLDT’s crash was to be contained. The Phisix was down by only .4%, helped by another marking the close pump.

Mostly bank issues were responsible for offsetting declines by PLDT and of the other majors.

By tomorrow, TEL’s losses would have been forgotten. And because losses are not to be allowed, violent pumping will be the mechanical response.

PS I will deal with SMPH in the coming days.

More Proof of How Credit Fueled Asset Bubbles Has Spurred the War on Mining

Last June I wrote

And because the Duterte regime believes that the bubble economy will continue to provide them with the necessary tax revenues for their pet boondoggles, they believe that they can exorcise the mining industry of environmental evils through intimidation.

More proof of this. From Interksyon

President Rodrigo Duterte raised the pressure on the mining sector on Monday, saying the resources-rich country can live without the industry if firms fail to comply with environmental laws…

"I can do away with 40 billion (pesos, or $840 million annual mining taxes). I will shut all of you down. You obey or we will survive as a nation without you," Duterte told a rare press conference, referring to the industry.

Well, my prediction is that things will radically change when the bubble pops.

Once the bubble economy begins to corrode and where prices of metals soar, such industry bullying will come to an end. Ban on mining will transform to welcome back mining!

First, the tax numbers provided by the Bureau of Treasury below tells us why such volte face will come sooner than later.

 

 

Second, higher precious metal prices will encourage more mining whether legal or illegal

 

So policy flipflopping will be the standard of this regime.

Chart of the day: ASEAN Twins are Back!

Just after the Phisix hit a milestone high in April 2015, a curious coincidence appears to have developed. Then I wrote,

Here is a trivia, aside from being heads of states of two of the largest ASEAN nations, what does Philippine President Aquino and Indonesian President Widodo share in common?

Well the answer is that both presidents graced their respective stock markets in April where both indices had been at record highs. In addition, both political leaders delivered their desired targets for their respective stock markets during the said occasion.

Well, what do you know? The twins are back!!!!

PS. It has been truly spectacular to see how corrections at the PSE would prompt for stunningly vicious price pumping.  

As noted this weekend, 8,000 has served as a Maginot line from which must be defended at all costs! So yesterday's low volume compulsive-obsessive bidding designed to heave the headline index back to 8,000. All these reinforces the entrenchment of the entitlement mentality, the PSTD (fear of crashes), and the deepening emotional attachment or convictions of a one way street. And this could likely lead to a final vertical BW-SSO runup.  

Moreover it's truly amazing to see how such pumping would be powered by post-lunch coordinated or well organised afternoon delight pumps! History is in the making.