Phisix 7,150: Prospects of a Strong Man Rule Sends Peso Tumbling, Why A Shift to the Political Left Will Mean A Weaker Peso

Democratic socialism, then, is not a doctrine designed to protect the liberal values of independence, autonomy, and self-direction that many on the left still value to some degree. It is, on the contrary, a doctrine that forces those of us who cherish those liberal values onto a slippery slope toward tyranny.—Professor Sandy Ikeda

In this issue

Phisix 7,150: Prospects of a Strong Man Rule Sends Peso Tumbling, Why A Shift to the Political Left Will Mean A Weaker Peso

-Prospects of a Strong Man Rule Sends Peso Tumbling

-The Political Economy of Leftist Governments Leads To Weak Currencies

-Canary in the Coal Mine: Century Property’s Real Estate Sales Crash in 2015 as Debt Swells!

-Real Estate Banking Loans Nears BSP’s Cap, What the Resurgence of Money Supply Growth Implies

-Has The Philippine Presidential Elections Been About An Angry Vote Or A Bubble Vote?

-Philippine Presidential Election’s Unseen Winner: None of the Above!

-Election Surveys: To Trust or Not?

Phisix 7,150: Prospects of a Strong Man Rule Sends Peso Tumbling, Why A Shift to the Political Left Will Mean A Weaker Peso

Prospects of a Strong Man Rule Sends Peso Tumbling

In defense of the status quo, a claim was made that the pesos’ predicament should be put in ‘perspective’. And that the perspective of the anemic peso has been founded on a ‘regional’ dynamic.

So let us play ‘spot the odd man out’ from the diagram below.

Since the US Federal Reserve opted to maintain their current policy stance last week, the US dollar has been under siege against most major currencies. Similarly the feeble US dollar has sent commodities skyrocketing.

And the fall in the US Dollar has likewise permeated to Asia. So the regional perspective, contra to the unfounded assertion, has been a weak USD and strong Asian currencies. That’s with the exception of the Philippine peso and the Malaysian ringgit.

So what has prompted the two currencies to resist or defy the regional trend?

Domestic factors apparently have been the most likely answer.

The escalating corruption scandal involving Malaysia’s Prime Minister has impelled Malaysia’s state owned 1Malaysia Development Bhd (1MBDB) to default on its $1.75 billion debt last week. While the USD myr rallied following the announced default, the rebound wasn’t enough to offset losses incurred at the start of the week. So the Malaysian ringgit closed marginally down .1% or almost unchanged for the week.

This leaves the odd man out, the sole Asian (Asian-East Asian) currency to post a substantial loss for the week; the Philippine peso

While I have suggested that the BSP’s window dressing of GIRs through derivatives may have a culprit, last week’s actions points to other more significant factor/s.

With a week to go before national elections, uncertainties appear to have cast a pall on the peso.

Popularity of a self-proclaimed controversial leftist candidate recently zoomed to the top according to the polls, against a field of aspiring contenders for the highest national position.

This is a showcase of the remarkable careening of sentiment by the voting population to the political left.

And such dramatic transition to the political left may have possibly sent jitters to the some of the elites for them to panic buy the USD.

Based on official data, the peso closed down by .51% or from 46.65 last week to 46.89 last April 29 Friday.

However, Bloomberg’s data on international trade of the Asian reveal that the peso even fell further to 46.91 or down .57% in the US trading session.

The USD peso had been quoted last at 47.04-47.05 based on Google, Yahoo and Investing.com. This means that unless the BSP intervenes, Monday’s opening trade will likely be at range of the mid 46.90s-47.05.

In short, there seems to be a real panic out of the peso. We should see if this dynamic holds next week.

The Political Economy of Leftist Governments Leads To Weak Currencies

Weak currency in the prospect of a leftist government should be a natural outcome.

The shift to the political left only indicates that the thrust of the incoming administration will be to deepen the politicization of the economy.

This basically means bigger government or political centralization at the expense of the already constrained market economy.

Given that government will assume a bigger role, then this means that the rate of growth of government spending should rise faster than the economy. Therefore, fiscal deficits will only balloon.

Even more, the cost of financing a bigger government should translate to lower economic performance.

First, an increase in the size of the government translates to more competition with the private sector for resources, this should entail of the ‘crowding out’ of the private sector (all things being equal). In short, the more the transfer of resources to the government, the less resources available to the private sector.

Second, such transfers would entail of less efficient use of resources. The focus on consumption, particularly politically directed consumption, will infer to more deadweight losses in the economy that would lead to lower productivity—and eventual decline in the standard of living.

Third, the financing of a bigger government will translate to higher cost of doing business, via increased taxes, higher inflation rates, larger political compliance costs, regulatory obstacles and more corruption. This extrapolates to a much higher hurdle rate required for investments. And higher hurdle rates will deduce to diminished investments.

Don’t forget government’s survival depends on mostly expropriation of resources from the private sector, through taxation and inflation (invisible taxation).

Fourth, the government will likely decrease participation of private sector in the economy through legislation. The government will likely resort to the substitution of private sector participation through nationalizations. Or that the government will increase regulations and mandates that will raise barriers to entry. So by picking on winners, the incoming administration may essentially endow the privilege of political protection from competition to select favored (rent seeking/crony) private entities or to state owned enterprises.

And nationalization of enterprises will likely focus on key industries that will ensure the preservation of power of the new administration and those subject to populist clamor. Financials and energy sector are most likely candidates.

Fifth, given the prospects of diminished role of the private sector, which should put pressure on government financing, the government will likely increase the recourse to financial repression policies. Financial repression policies will allow the government to capture more resources or savings from the public indirectly or with less political visibility.

Hence, the government will not only resort to more inflationism combined with more financial regulations, they would likely tighten capital controls and reverse some of the recent liberalization activities undertaken by the outgoing regime.

And finally, since deficits will bulge, the government will have to raise taxes and or fund itself with more debt. Again, higher taxes in itself will not automatically weaken the peso. For as long as it can be paid for by taxes, more debt will also not contribute to the attenuation of the peso. The debilitation of the peso will occur when government increases money supply to directly monetize its spending, or, beyond the ability for taxes, employ bank credit expansion to fill the spending gap by purchasing government debt.

History has shown that dictators here and elsewhere have such a ravenous appetite on spending other people’s money. The last time the Philippines had a strong man rule, the peso crashed by 81% in 20 years!

Worst, the spendthrift strong man regime culminated with a balance of payment crisis in 1983-1984

The slomo boiling frog of the peso virtually sowed the seeds or paved way for the mass diaspora of laborers, which today we call as heroes or the OFWs.

Yet the previous dictator, whom practiced oligarchic crony capitalism, was hardly a leftist.

Today should the leftist government prevail, they will be faced with huge imbalances brought about by the previous two administration’s financial repression—negative real rates policies—that inflated a credit bubble which has been manifested in domestic asset markets (property, stocks and bonds). Worst, a larger government in the face of present economic maladjustments will deduce to a perfect storm.

Tinkering with money always generate a boom first, such can be seen in the Phisix 1970-1985 cycle. The boom which lasted from 1972 to 1978 culminated with a bust (blue bars).

Additionally the current leading leftist candidate has even swaggered about instituting a “revolutionary government” by “abolishing Congress” and intends to amend the constitution, which most likely will be used to convoke or usurp more power for themselves, with lesser encumbrance from checks and balances.

I am captivated by thought of the abolishment of Congress. However, in replacement of what? A left dictatorship? This means to jump from the frying pan to the fire!

The modern day or contemporary versions of leftist governments have been those that impose state capitalism or economic fascism.

State capitalism is defined¹ as “commercial (i.e., for-profit) economic activity “undertaken by the state, where the means of production are organized and managed as state-owned business enterprises (including the processes of capital accumulation, wage labor, and centralized management), or where there is otherwise a dominance of corporatized government agencies (agencies organized along business management practices) or publicly listed corporations of which the state has controlling shares, or “private capitalist economy controlled by a state, often meaning a privately owned economy that is subject to statist economic planning.”

On the other hand economic fascism entails “economic dirigisme”² or “an economy where the government exerts strong directive influence over investment, as opposed to having a merely regulatory role. In general, apart from the nationalizations of some industries, fascist economies were based on private individuals being allowed property and private initiative, but these were contingent upon service to the state. 

In short, modern day leftist regimes are characterized by the state directed economic activities through combination of state owned enterprises and government dictated privately owned crony firms.

Of course, pray that any “revolutionary government” by the new administration will not be of the early twentieth century leftist strain, similar to the Bolshevik revolution and its offspring Lenin-Stalin’s USSR, the Nazi (national socialist) dictatorship, Mao ZeDong’s Great leap forward, Pol Pot’s "Democratic Kampuchea" and others.

In the twentieth century paragon, stock markets did not exist in the said countries because property rights or private ownership were banned in favor of collective ownership.

All these indicate that when the perceive risks to private property increases, capital flight would be an intuitive response to the economics of leftist-dictatorship governments.

The peso (blue) apparently dragged down the Phisix (red) which closed down 1.32% over the week.

It has been interesting to note that both the peso-Phisix appears to have hit an inflection point where the USD php may have bottomed while the Phisix may have climaxed.

The inverse correlation of these two appears to have been reinforced.

Yet it is sad, if not alarming, to see how populist politics has fundamentally underwritten the peso’s downfall.

Canary in the Coal Mine: Century Property’s Real Estate Sales Crash in 2015 as Debt Swells!

This is just a short note on what seems as more proof of the deteriorating conditions for the real estate industry in 2015.

The annual report of high end property developer Century Properties has shown of a shocking -28.38% collapse in real estate sales in 2015!

The company blames this partly to accounting practices and a shortage of new projects³: For the year ended December 31, 2015, the Group recorded revenue from real estate sales amounting to P7,751.3 million compared to P10,822.9 million in 2014. The decrease in real estate sales is attributable to less revenue recognized in 2015 for projects that turned over in 2015 and prior years. A significant portion of revenue from these projects were already recognized in 2014 and prior years. In addition, there were less project launches in 2015

Yet in the same report the company seem to say that the opposite, they have lots of projects at work: The Company is currently developing six master-planned communities that are expected to have 28 residential condominium buildings, three commercial buildings for lease, and 934 landed houses, with a total expected GFA (with parking) of 1,671,339 sq.m. In addition, the Company has agreed to purchase 50% of the usage and leasehold rights of Asian Century Center, an office building in Bonifacio Global City. Asian Century Center is currently being developed by Asian Carmaker Corporation

The collapse in CPG’s sales has equally been manifested by a 30% crash in eps growth!

So far, CPG has had the worst performance among firms in the real estate industry in 2015. Yet the firm’s direction (falling top line which has spilled to the over to the bottom line and soaring debt) has not been in isolation but has only reinforced what seems a formative industry trend.

In addition, as CPG’s sales crashed, this has compounded on her cash flow quandary for the company to significantly lever up on debt. CPG’s long term debt alone has swollen by +34.8% in 2015.

CPG looks like the proverbial canary in the coal mine.

Real Estate Banking Loans Nears BSP’s Cap, What the Resurgence of Money Supply Growth Implies

And it has been interesting to observe that after a huge jump in banking loans to the real estate sector in the last two months (which grew by 23.26% January and 25.45% in February), such sizzling rate of growth seem to have moderated or fizzled back to its 2H 2015 levels in March (20.22%).

The share of loans to the real estate industry relative to the general (production loans) economy now accounts for 19.6%. This basically approaches the BSP’s loan cap for the sector! And this probably explains the slowdown.

Of course, I believe that the loans to the sector have been severely understated. The race to build supply in the face leveraged vendor financed sales has only led to cash flow deficiencies for MOST of real estate companies. This means that the industry has to rely on bigger borrowings to bridge finance everything from marketing, sales, operations, debt servicing and expansion. CPG is an example.

This implies too that loans incurred by the sector may have been channeled through different unofficial routes excluding bonds, which may include intra-company loans, unrelated company to company loans, promissory notes/placements or the diversion of loans from the reported BSP categorization, shadow banks and others, which may have been used to circumvent such regulatory loan cap.

And with the exception to banking loans to the financial sector, the rate of growth of loans to other sectors moderated, namely trade, electricity and construction. Loans to the manufacturing sector crashed anew from 5.49% in January and 5.73% in February to only 1.84% in March. This hardly has been a sign that the manufacturing sector has been growing.

Yet the surge in banking loans to the financial sector could have been used to finance speculative positions at the PSE.

Even more, the rate of growth to the construction industry continues to plunge.

At still a hefty 22.89%, it has dropped to its lowest level since 2013. (bottom window) The share of bank loans to the sector only accounted for 3% of production loans.

While this may partly be construed as diminishing returns on loan growth, this can also be seen as moderation in construction activities. If it is the latter then this leads us to a paradox, if construction activities has been slowing (bolstered by decline in 2015’s construction permits) then where has the recent engorgement of real estate loans been channeled to? Had such been used to finance frenzied speculative bids on properties (e.g. 3 bedroom Makati)? Or has current debt acquisition been more about debt servicing?

Another interesting take has been that the recent upside turnaround of credit growth has likewise been manifested on M3 and thus CPI.

While higher M3 will likely boost statistical GDP (money value of goods and services) in 1Q, it will also have a lagged effect on CPI and other real economy prices.

The point here is that higher real economy prices will not only eventually erode on profits (aggravating current conditions) but most importantly sink the purchasing power of residents.

Additionally, it points to a lower peso!

Has The Philippine Presidential Elections Been About An Angry Vote Or A Bubble Vote?

I came across on a headline which attributes the current voting sentiment in the Philippines as akin to a vote on US presidential aspirant Donald Trump.

Funny, but Donald Trump has NO political track record or history to speak of. Having said so, he hasn’t killed anyone as a standing politician. This is unlike one of the popular candidates in the Philippines. And I have not come across any article to claim that Mr Trump brags about or overtly desire to kill people to accomplish political objectives. [As a side note, I do not endorse any US and Philippine candidates]

On the other hand, ALL Philippine national (presidential and vice presidential) candidates are establishment politicians. The difference is in the position; some are from local levels, some from the bureaucracy and from the national levels.

In other words, a Trump comparison is virtually off the rails for Philippine conditions.

So this hardly been about anti-establishment votes, but an election composed of different establishment personalities with their respective baggage of vested interest groups.

In addition, piggybacking on the claim of the Trump like sentiment, the argument stretches on the idea that this election would account for an ‘angry’ vote.

As previously noted, angry of what? Angry of the establishment’s boom? Whatever happened to the statistical boom? Why has the boom not have gravitated populist sentiment towards the incumbent? Why has there been a pivotal shift towards the opposition or to the political left?

On the contrary, I’d suggest that current sentiment has hardly been an angry vote. Instead it represents a bubble vote.

The establishment boom has warped or mangled people’s mindsets into imbuing an ultra-short term orientation to embrace on knee jerk populist solutions. They must have watched too much of super hero movies as to lust for the real world assimilation of the savior-super hero effect.

Worst, current sentiment represents an expression from a substantial segment of the populace for an increasing desire to use of arbitrary violence through elective dictatorship or ‘strong man bubble’ to solve socio-political economic predicaments. This attraction towards violence, at the expense of due process, highlights on the deterioration of people’s moral fiber.

Basically, current sentiment seems to have overturned on the lessons of two people power events where political transitions had been nested on the peaceful overthrow of the old guards.

And that the appeal to violence seem to have emerged from grave misperceptions of the supposed lack of ‘political will’ for the ‘enforcement’ of rules

This only reveals that many people seem to think that enforcement has no economic cost or consequences! Just where the heck, will the government get resources to pay for ‘enforcement’? Manna from heaven?

And because absence of the costs, they see only beneficial social consequences!

Such are proofs that bubble mentality have only spread from the financial world to the political sphere.

More importantly, given that resources are scarce, just what should be the order of priorities by the new administration in the allocation of resources? Or just how will ‘enforcement’ take place?

To focus on spending and action on political priority ‘A’ means LESS spending and action on political priority ‘B’ or ‘C’ or ‘D’ to the nth. This is called opportunity cost.

Yet once the spending and action spread to a diverse field of interests, say political priority A, B, C, D to the nth, then political resources and actions will spread thin! Enforcement dissipates! And resources include people—bureaucrats, police and other political agents who will be task to ‘enforce’.

And the unsatisfied sectors, or sectors provided with less priority, say political interest B, C, and D, will likely cavil and demand for more share of spending and attention. So then we revert to the same cycle of decrying lack of political will!

And how will the new administration respond? By permanently silencing them?

In short, the notion that authoritarians knows of the interests of all individuals (or even various interests groups) represents an unalloyed fantasy.

The enforcement of multifarious political aspects is a complex social dynamic which cannot be reduced to simplistic rhetoric by demagogues.

Or if authorities do not possess the grassroots or decentralized knowledge, how can they resolve to satisfy the fierce competition among various political agendas?

But does it matter? In the world of politics, soundbites and images seem to be good enough.

Yet almost none have given a thought that uneconomic or unviable rules will always lead to enforcement failures.

The late great economic journalist Henry Hazlitt cited price controls as example⁴ (bold added)

The trouble is that their attempted legislative remedies turn out to be systematically wrong.

It is complained that prices are too high. A law is passed forbidding them to go higher. The result is that fewer and fewer items are produced, or that black markets develop. The law is ignored, or finally repealed.

It is said that rents are too high. Rent ceilings are imposed. New apartments cease to be built, or at least fewer of them. Old apartment buildings stand vacant, and fall into decay. Higher rents are eventually legally allowed, but they are practically always set below what market rates would be. The result is that tenants, in whose supposed interest the rent controls were imposed, eventually suffer as a body even more than landlords, because there is a chronic shortage of housing. Wages are supposed to be too low. Minimum wages are fixed. The result is that teenagers, and especially black teenagers, are thrown out of work and on the relief rolls. The law encourages strong unions and compels employers to "bargain collectively" with them. The result is often excessive wage-rates, and a chronic amount of unemployed.

As shown above, most of social problems have NOT been about the enforcement, but rather what mainstream applies as remedies to economic shortcomings through short sighted LEGISLATED LAW.

As American economist Armen A. Alchian wrote⁵ (bold mine)

Economics does not say any activities are bad and hence ought to be stopped.  It says if you want to restrain them, you can raise the price – the cost of doing that action.  Still, behavior in a capitalistic system is, by definition, more difficult to control by political authority because private property gives us more extensive authority over our lifestyles.  That is why, whatever the legislated law, it does not follow that its intent will be achieved.  Legislated law is overpowered by economic laws of capitalism, which often nullify or pervert intended effects.  So political forces are more and more designed to reduce the scope of private property rights, a bleak future.

Said simply, unviable or uneconomic mandates or rules or regulations, even when draconian enforcement has been applied are fated or doomed to fail.

What they do instead is to foster more social contortions.

Of course, it has not only an been issue of uneconomical aspects, just so to please the authority’s subjective moral standards, arbitrary statutes may be designed to plunder, oppress and impinge unnecessary violence on some segments of the political constituency

Example, the policy of plunder through elections, from the great French political economist Frédéric Bastiat⁶

What is the cry going up everywhere, from all ranks and classes? All for one! When we say the word one, we think of ourselves, and what we demand is to receive an unearned share in the fruits of the labor of all. In other words, we are creating an organized system of plunder. Unquestionably, simple out-and-out plunder is so clearly unjust as to be repugnant to us; but, thanks to the motto, all for one, we can allay our qualms of conscience. We impose on others the duty of working for us. Then, we arrogate to ourselves the right to enjoy the fruits of other men's labor. We call upon the state, the law, to enforce our so-called duty, to protect our so-called right, and we end in the fantastic situation of robbing one another in the name of brotherhood. We live at other men's expense, and then call ourselves heroically self-sacrificing for so doing. Oh, the unaccountable folly of the human mind! Oh, the deviousness of greed! It is not enough that each of us tries to increase our share at the expense of others; it is not enough that we want to profit from labor that we have not performed. We even convince ourselves that in the process we are sublime examples of self-sacrifice; we almost go so far as to call our unselfishness Christlike. We have become so blind that we do not see that the sacrifices that cause us to weep with admiration as we contemplate ourselves are not made by us at all, but are exacted by us of others

Rings a bell?

In the twentieth century, tens of millions of innocent people have lost their lives when governments decided to impose stringent ‘enforcement’ predicated on unfeasible, oppressive and thereby unjust utopian ideologies. I hope this would not be the template for the next regime.

Also, hardly anyone has given a thought that despite the electoral demonstration by candidates to impose on their brand of ‘political will’, politicians are human beings, where their actions will likely be influenced by their subjective preferences, values and sense of ethics that should aim to satisfy their personal Maslow’s hierarchy.

Alternatively, this means that those who aspire for power will have not only cravings for socio-political power, but goals pillared on attaining corporeal pleasantries and social rewards. Thus their actions will likely evolve around placating agents who will supply these factors to them. On the hand, they are likely to use repression to those whom they see as a threat or to perceived competitors (or political foes).

Known as the public choice theory, the halo effect from politicians will prove to be a mirage. From the great economist James Buchanan⁷.

When the very elementary step is taken to extend the behavioural models of economics to apply to public choosers, to those who participate variously in political roles, as voters, politicians, bureaucrats, planners, party leaders, etc., the romantic vision that was essential to the whole socialist myth vanishes.  If those who make decisions for other are finally seen as ordinary persons, just like everyone else, how can the awesome delegation of authority that must characterize the centralized economy be justified?

In other words, the idea of sincerity and down to earth personality traits represents nothing more than a personality cult or a populist delusion.

From the realist aspects, all candidates have political baggage (vested interest groups) to carry. And since there is no free lunch, there will cost for those cargoes when the candidate wins.

All these suggests that alarmingly, when the economic downturn surfaces, considering the ‘fragmented’ nature of Philippine politics, which has been backed by the election of the plural minority, where the winner may impose on radical ideological platforms, political risks may likely evolve towards increased societal violence.

And given the populist seduction for bloodshed, what stops the new administration from provoking risk of war with neighbors?

People with no real experience of violence think that violence may not happen to them. So the seek violence to befall on others without an inkling of the likely consequences these may occur even to them.

Bubbles have made people believe that fantasies are real.

Bubbles are never economically viable, so they always blow up. This applies to political bubbles as well.

At the day’s end, politics will never overrule the laws of economics.

Also think of what the economic downturn from a bubble economy (legacy from two administrations), the shift towards big repressive government (prospective regime) and increased political violence will do to the peso.

This wonderful quote from the great dean of the Austrian School of Economics, Murray N. Rothbard seems to reverberate⁸.

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a "dismal science." But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

Philippine Presidential Election’s Unseen Winner: None of the Above!

Philippine democracy is supposed to represent a system that is based on the election of plurality voting. In plurality voting, the winner needs only the most number of votes, and not a majority, to get elected.

However if one considers the overall picture, Philippine democracy is an election of the plural minority.

And to extend on the unseen fact, Philippine democracy muzzles the true winners: the NONE of the ABOVE—the biggest plural minority.

Let me cite the 2010 elections as example

In the 2010 national presidential elections, today’s outgoing president garnered 15.209 million votes or 42% of the valid 36.139 million votes cast. Voter turnout was at 74.34% or 38.149 million. About 5.27% or 2.01 million were invalid votes. Total registered voters then were at 51.292 million.

In 2010, the population was 92.34 million (PSA) or 92.1 million (census).

Census data said that 60.3% or 55.5 million were at the voting age population.

So what does the data above say?

The winning candidate accounted for only 29.65% (or a third) of total registered voters and 27.4% of population at voting age (a little more than a quarter of voting population). If one would use PSA data the said ratio will decline more, although marginally.

Additionally, registered voters who did not vote accounted for 13.143 million while non registered voters at voting age totaled 4.21 million.

Therefore non voters, who were registered, and non registered people summed up to 17.535 million. That’s 2.144 million MORE than the winning vote! The PSA data would imply for a much bigger margin.

And one would hear the pronouncement that “the people have spoken”. They haven’t.

The fact that there had been more non voters (registered and non registered) implies that “the none of the above” have actually won!

In 2010, the non-voters were the BIGGER plural minority. This group had opted to stay on the sidelines. Unfortunately, their voices had been drowned out by the establishment whom has arrogated upon themselves reality.

As I previously asked⁹: So how can we adduce ‘people power’ when today’s Philippine political exercise represents a vote of the plural minority?

Unless voter turnout significantly improves and in spite of the current drama, I don’t think such dynamic will change in the present elections.

Voter turnout appears to be in a decline since 1998.

Yet the elected plural minority has imposed unseen costs on the bigger plural minority, and more importantly, to the entire population. For the current administration these costs are the huge credit bubble, the weak peso, inflation, surging inequality and US bases.

And such costs appear to have backfired for the opposition to gain significant sway on the odds of getting elected next week.

And the cycle will only repeat. The loud minority will claim legitimacy to dictate on and impose policies that will most likely injure the majority.

Yet elections are beyond cheering of personalities. Since actions have consequences, social policies will all entail multifaceted intertemporal costs. And the cost of the actions taken by such leaders will be borne by the citizenry. And such cost represents an externality: The externality of the delusions of social democracy designed to justify the rule of the establishment elites.

As author and assistant professor Jason Brennan trenchantly observed¹⁰

How other people vote is my business. After all, they make it my business. Electoral decisions are imposed upon all through force, that is, through violence and threats of violence. When it comes to politics, we are not free to walk away from bad decisions. Voters impose externalities upon others.

We would never say to everyone, “Who cares if you know anything about surgery or medicine? The important thing is that you make your cut.” Yet for some reason, we do say, “It doesn’t matter if you know much about politics. The important thing is to vote.” In both cases, incompetent decision-making can hurt innocent people.

Commonsense morality tells us to treat the two cases differently. Commonsense morality is wrong.

Because I do not want to impose externality upon others, I join the silent biggest plural minority.

Election Surveys: To Trust or Not?

It’s interesting to see people argue against trusting surveys. While I am with them in spirit, I really doubt if the reason they are arguing has been due to the context of the disinformation, or if the surveys simply don’t match their preferences/biases. Of course, they never say it directly.

It may be true that the intent of surveys have been to generate a bandwagon effect.

But if this assumption is true then surveys should be more accurate than less.

On the contrary, whatever the purpose, surveys have been proven to be imprecise.

Let me use this Wikipedia page on 2010 elections as example.

Second runner up Joseph Estrada was vastly underrated by both major domestic pollsters. Yet Mr Estrada racked up 26.25% of the votes cast compared to survey results of only 20%.

Importantly, in the VP category, one pollster showed that the winner, the administration candidate, had a huge margin over the opposition bet 37%-28%.

On the other hand, the other survey showed of a miniscule .2% lead by the opposition.

The actual outcome was 42% and 40% in favor of the opposition.

Ironically, both candidates are running again for the top spot.

The variance can be partly explained:

Surveys may indicate spur of the moment expressions—which may be fungible.

People may also say one thing and do another, perhaps as part of social signaling.

Surveys may also be manipulated for whatever reasons.

If people have been arguing over the credibility of election surveys, then why trust the credibility of the government’s GDP which mostly represents a statistics of an aggregated survey? Because the government have no motivation to skew information?

Won’t this signify as cognitive dissonance?

___

1 Wikipedia.org State capitalism

2 Wikipedia.org Economics of fascism

3 Century Properties Annual Report April 18, 2016 p.41 and 32-33 Edge.pse.com.ph

4 Henry Hazlitt, The ABCs of a Market Economy Mises.org April 29, 2016

5 Armen A. Alchian “Economic Laws and Political Legislation” from The Collected Works of Armen A. Alchian (2006) pages 604-605 of volume 2, Café Hayek Quotation of the Day… April 29, 2015

6 Bastiat, Frédéric Chapter 12 The Two Mottoes Economic Harmonies, Library of Economics and Liberty

7 James M. Buchanan The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty Café Hayek Quotation of the Day… October 3, 2013

8 Murray N. Rothbard The Death Wish of the Anarcho-Communists June 2, 2006 Mises.org

9 See Philippine Election Aftermath: Goodbye Illusion, Welcome Reality! May 23 2010

10 Jason Brennan The Ethics of Voting, theartoftheory.com

Phisix 7,150: Team Viagra Closes April With Another Huge Pump!

As expected, after failing to hold onto 7,200, Team Viagra won’t just allow the headline index to scuttle further. So they had to double their efforts to ensure that losses today won’t be deep. The end session pump have been intensive because today's session marks the last trading day of the month. And this may have accounting significance.

As a side note, let me add that Team Viagra’s actions have not been limited to cushioning losses but likewise amplifying gains during runs

Down .35% a second prior to the runoff phase, Team Viagra used marking the close during the market intervention phase to wipe off an astounding 90% of today’s losses. So the day closed nearly unchanged (-.05%)

Team Viagra had to make sure that each sector was covered, so they pumped select issues from each of the following major sectors 

As one would note, JGS has become one of the latest favorite. Deep losses by JGS suddenly became unchanged for the day due to a staggering 1.2% pump.

Today’s push on JFC contributed to 28% of the stock’s weekly gain 

Oh, before I close I included last Tuesday’s minor marking the close. 

As one would note, the rampant and intensive use of last minute pumping happens ONLY in the Philippines!  

Such rigging of the marketplace tell us why unscrupulous activities--like an international online hacking-heist, which ended up on a local bank--occurred. Add to this accusations over DBP's bond market manipulation.

And the public has been made to believe that the Philippine credit fueled boom has been puritanically based.

Charts and Images from PSE, Bloomberg, Colfinancial and Technistock

Bank of Japan’s Kuroda Stiffed Casino Addicts by Withholding Stimulus, Nikkei 225 Plunged 3.61% as Yen Rallies

If the Venezuelan government has run out of the money to print money, their counterparts in Japan, particularly the BoJ, seem to run out of spunk to deliver what they recently promised.

Casino addicts recently drooled over previous promises by the BoJ for more stimulus. Unfortunately, the BoJ duped them with a no-show today.

From Bloomberg

Shares in Tokyo tumbled, sending the Nikkei 225 Stock Average to its biggest loss since February, after the Bank of Japan maintained its monetary policy, confounding forecasts it would add to record stimulus.

The Topix index declined 3.2 percent to 1,340.55 at the close in Tokyo after the BOJ kept bond-buying, its negative interest rate and exchange-traded fund purchases unchanged. Volume on the Topix was about 48 percent higher than the 30-day average. Most economists surveyed by Bloomberg expected additional easing, with the stock gauge rising as much as 1.5 percent in the morning session. The Nikkei 225 retreated 3.6 percent to 16,666.05, its worst decline since Feb. 12. The yen surged 2.5 percent to 108.76 per dollar.

“It’s a total shock,” said Nader Naeimi, the Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $120 billion. “From currencies to equities to everything -- you can see the reaction in the markets. I can’t believe this. It’s very disappointing.”

The Nikkei’s 225 chart has been a wild roller coaster ride marked by stunning volatility. The Nikkei has been having a hard time to breach the high from the NIRP announcement. Today’s 3.61% brings the benchmark back below the resistance levels.

Increased incidences of heightened volatility only signifies the accumulating imbalances. As said last weekend,

Maladjustments, distortions and mispricing from sustained interventions have only been mounting. Politicians will never come to realize that there is no such thing as a free lunch until it is too late.

In Socialist Venezuela, Even Money Printers Run Out of Money to Print

When governments spend more than the tax revenues and or resources it generates, they eventually first run out of money. And if they continue to do so, they then eventually lose access to credit or money.

And given the dearth of resources, desperate governments usually resort to internal financing or the monetization of political spending via the printing press or the modern day printers the digital press (inflationism).

These usually ends up with the destruction of the currency via inflationism—hyperinflation

All these goes to show that the more a society relies on government, the more funding pressures, the greater the risk of inflation or even hyperinflation.

Well, when it comes to impoverishing constituencies through inflationism, socialism provides many modern day examples.

And one of the shining template has been current developments at Venezuela

UK’s former Prime Minister Margaret Thatcher once said that “The problem with socialism is that eventually you run out of other people's money [to spend].”

In socialist Venezuela, Ms. Thatcher’s keen observations can be construed literally. To paraphrase: The problem with socialism is that eventually you run out of money to print.

From Bloomberg:

Venezuela’s epic shortages are nothing new at this point. No diapers or car parts or aspirin -- it’s all been well documented. But now the country is at risk of running out of money itself.

In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.

Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.

This article is based on interviews with a dozen industry executives, diplomats and former officials as well as internal company and central bank documents. All of the companies declined official comment; the central bank did not respond to numerous requests for interviews and comment.

Here’s more

The story began last year when the government of President Nicolas Maduro tried to tamp down a growing currency shortfall. Multi-million-dollar orders were placed with a slew of currency makers ahead of December elections and holidays, when Venezuelans throng banks to cash their bonuses.

At one point, instead of a public bidding process, the central bank called an emergency meeting and asked companies to produce as many bills as possible. The companies complied, only to find payments not fully forthcoming.

Last month, De La Rue, the world’s largest currency maker, sent a letter to the central bank complaining that it was owed $71 million and would inform its shareholders if the money were not forthcoming. The letter was leaked to a Venezuelan news website and confirmed by Bloomberg News.

“It’s an unprecedented case in history that a country with such high inflation cannot get new bills,” said Jose Guerra, an opposition law maker and former director of economic research at the central bank. Late last year, the central bank ordered more than 10 billion bank notes, surpassing the 7.6 billion the U.S. Federal Reserve requested this year for an economy many times the size of Venezuela’s.

The above shows of the continuing to collapse by Venezuela’s currency the bolivar

The following accounts for Venezuela’s implied inflation rates (monthly and annually). (charts from Cato's Troubled Currencies web page)

Socialism has populist appeal, but they are uneconomical or unviable. 

At the end of the day, the socialism equates to social decay. Venezuela should serve as a paragon.

Quote of the Day: Enough is Enough. No Endorsement to State Plunder of People Through Elections

Austrian economist Robert Higgs posted at his Facebook page:

I realize that the suspense may become unbearable unless I make the following announcement, so here it is: I will not be endorsing any of the candidates seeking the Republican or Democratic Party nominations for president nor any of those seeking nomination by the minor parties. Indeed, I will not be endorsing the election itself. Finally, I will not be endorsing the continued existence of the nation-state over which these aspirants seek to preside. Enough is enough. I will not give my endorsement to politics as usual, a process by which competing parties seek to gain control the state's powers in order to plunder and bully the people at large for the sake of their principal supporters. Oh that all other people would join me in withdrawing their endorsement -- indeed, their acquiescence and blessings. Decent people ought to flee the whole diabolical process, leaving only the criminally inclined to go to war exclusively against one another without sacrificing the bodies, souls, and wealth of innocent parties.

Walter Williams: Self Ownership is the Foundation of Freedom

The great economist Walter Williams explains the ethics of private property: (courtesy of lewrockwell.com) [bold added]

My initial premise, when looking at all human issues, is that each of us owns himself. I am my private property, and you are your private property. If you agree with that premise, then certain human actions are moral and others immoral. The reason murder is immoral is that it violates private property. Similarly, rape and theft are immoral, for them, too, violate private property. Most Americans will agree that murder and rape violate people’s property rights and are hence immoral. But there may not be so much agreement about theft. Let’s look at it.

Theft is when a person’s property is taken from him — through stealth, force, intimidation, threats or coercion — and given to another to whom it does not belong. If a person took your property — even to help another person who is in need — it would be called theft. Suppose three people agreed to that taking. Would it be deemed theft? What if 100,000 or several hundred million people agreed to do so? Would that be deemed theft? Another way to ask these questions is: Does a consensus establish morality?

Self-ownership can offer solutions to many seemingly moral/ethical dilemmas. One is the sale of human organs. There is a severe shortage of organs for transplantation. Most people in need of an organdie or become very ill while they await an organ donation. Many more organs would become available if there were a market for them. Through the National Organ Transplant Act of 1984, Congress has made organ sales illegal. Congress clearly has the power to prevent organ sales, but does it have a right? The answer to that question comes by asking: Who owns your organs? One test of ownership is whether you have the right to sell something. In the case of organs, if it is Congress that owns our organs, then we have no right to sell them. That would be stealing from Congress.

People have the right to take chances with their own lives. People do not have a right to take chances with the lives of others. That is why laws that mandate that cars have brakes are consistent with liberty and seat belt laws are not. You might say, “Aha, Williams, we’ve got you there because if you don’t wear a seatbelt and you have an accident and turn into a vegetable, society is burdened with taking care of you!” That’s not a problem of liberty. It’s a problem of socialism. Nobody should be forced to take care of me for any reason. If government assumes the job of taking care of us, then Congress can control just about every aspect of our lives. When I was a rebellious teenager, my mother frequently told me, “As long as you’re living in my house and I’m paying the bills, you’re going to do as I say.” That kind of thinking is OK for children, but not for emancipated adults.

I have only touched the surface of ideas of self-ownership. The immorality associated with violation of the principle of self-ownership lies at the root of problems that could lead to our doom as a great nation. In fiscal 2015, total government spending — federal, state and local — was about $6.41 trillion. That’s about 36 percent of our gross domestic product. The federal government spent $3.69 trillion. At least two-thirds of that spending can be described as the government’s taking the property of one American and giving it to another. That’s our moral tragedy: We’ve become a nation of people endeavoring to live at the expense of others — in a word, a nation of thieves.

This applies universally and not just to the Americans.

Ludwig von Mises: The Impossiblity of Economic Calculation Under Socialism

Excerpted from the great Austrian Economist Ludwig von Mises' magnum opus Human Action (source: Econolib) [bold added]

The paradox of "planning" is that it cannot plan, because of the absence of economic calculation. What is called a planned economy is no economy at all. It is just a system of groping about in the dark. There is no question of a rational choice of means for the best possible attainment of the ultimate ends sought. What is called conscious planning is precisely the elimination of conscious purposive action.

For more than a hundred years the substitution of socialist planning for private enterprise has been the main political issue. Thousands and thousands of books have been published for and against the communist plans. No other subject has been more eagerly discussed in private circles, in the press, in public gatherings, in the meetings of learned societies, in election campaigns, and in parliaments. Wars have been fought and rivers of blood have been shed for the cause of socialism. Yet in all these years the essential question has not been raised...

It is the two fundamental errors of mathematical economics that must be indicted.

The mathematical economists are almost exclusively intent upon the study of what they call economic equilibrium and the static state. Recourse to the imaginary construction of an evenly rotating economy is, as has been pointed out, an indispensable mental tool of economic reasoning. But it is a grave mistake to consider this auxiliary tool as anything else than an imaginary construction, and to overlook the fact that it has not only no counterpart in reality, but cannot even be thought through consistently to its ultimate logical consequences. The mathematical economist, blinded by the prepossession that economics must be constructed according to the pattern of Newtonian mechanics and is open to treatment by mathematical methods, misconstrues entirely the subject matter of his investigations. He no longer deals with human action but with a soulless mechanism mysteriously actuated by forces not open to further analysis. In the imaginary construction of the evenly rotating economy there is, of course, no room for the entrepreneurial function. Thus the mathematical economist eliminates the entrepreneur from his thought. He has no need for this mover and shaker whose never ceasing intervention prevents the imaginary system from reaching the state of perfect equilibrium and static conditions. He hates the entrepreneur as a disturbing element. The prices of the factors of production, as the mathematical economist sees it, are determined by the intersection of two curves, not by human action.

Moreover, in drawing his cherished curves of cost and price, the mathematical economist fails to see that the reduction of costs and prices to homogeneous magnitudes implies the use of a common medium of exchange. Thus he creates the illusion that calculation of costs and prices could be resorted to even in the absence of a common denominator of the exchange ratios of the factors of production.

The result is that from the writings of the mathematical economists the imaginary construction of a socialist commonwealth emerges as a realizable system of cooperation under the division of labor, as a full-fledged alternative to the economic system based on private control of the means of production. The director of the socialist community will be in a position to allocate the various factors of production in a rational way, i.e., on the ground of calculation. Men can have both socialist cooperation under the division of labor and rational employment of the factors of production. They are free to adopt socialism without abandoning economy in the choice of means. Socialism does not enjoin the renunciation of rationality in the employment of the factors of production. It is a variety of rational social action.

An apparent verification of these errors was seen in the experience of the socialist governments of Soviet Russia and Nazi Germany. People do not realize that these were not isolated socialist systems. They were operating in an environment in which the price system still worked. They could resort to economic calculation on the ground of the prices established abroad. Without the aid of these prices their actions would have been aimless and planless. Only because they were able to refer to these foreign prices were they able to calculate, to keep books, and to prepare their much talked about plans.

Quote of the Day: Prohibition Is The Major Cause Of Crime

Austrian economist Mark Thornton in an interview with the Daily Bell

Prohibition is the major cause of crime. There are the crimes associated with buying and selling prohibited products like heroin and services like prostitution. Then there are crimes and violence associated with prohibition like those related to street gangs and organized crime, such as drive-by shootings, mafia "hits," racketeering, etc. Violence basically replaces the rule of law when markets are prohibited. Prohibition is the fountainhead of corruption. Without prohibition, corruption would be limited to things like elections and government contracts. With prohibition an enormous incentive (due to high prices) is created for black marketeers to offer bribes to law enforcement, the judicial system, bureaucrats and politicians to protect the bribe payer from being caught and punished. In addition, the bribe payer may offer government officials information about competitors, making law enforcement look competent and keeping prices high.

US Economy: Retail Woes Means Bad News for Shopping Malls

I previously mentioned about the ongoing retail woes in the US.

And one of the symptoms can be seen below.

The above chart reveals that inventory has been rising faster than sales. Even more, the ratio has now reached 2008 or recessionary levels!

A big influence on this has been that sales growth for both food and non food outlets has been steadily trending down since 2012 (charts above from St. Louis Federal Reserve's Fed Fred)

Apparently, financial strains in the US retail industry has now diffused or spread to their domestic shopping mall industry

The Business Insider reported (bold added)

Retailers like Sears, JCPenney, and Macy's have been closing hundreds of locations over the last several years, leaving dead or dying shopping malls in their wake as they try to remain profitable amid the growing threat of e-commerce.

But these closures are just the tip of the iceberg, according to a new report from real-estate research firm Green Street Advisors.

Department stores need to close as many as 800 more locations — or one-fifth of all anchor space in US malls — to return to the levels of productivity they saw 10 years ago, according to the report, which was first cited by The Wall Street Journal.

Sears would have to close about 300 stores (or nearly half of its existing locations), JCPenney would have to close 320 stores (31% of its current fleet), Nordstrom would have to close 30 stores (25% of its fleet), and Macy's would have to close 70 stores (9% of its total) to generate the kind of sales per square foot they saw in 2006.

The closures could force hundreds more shopping malls in the US to shut down, according to Green Street.

Department stores, known as mall anchors, have traditionally been major traffic drivers for shopping malls.

But their sales have been declining industry-wide for nearly a decade. Overall, departments stores' average productivity — or sales per square foot — has dropped 24% to $165 per square foot since 2006, according to the report.

Once anchors shut down, mall owners can have a difficult time finding retailers large enough to replace them.

Many owners are aiming to replace department stores with movie theaters, restaurants, and discount retailers like TJ Maxx, Ross Stores, and Marshalls.

Nicholas Eckhart Rolling Acres Mall.

But if a mall is hit by two or more anchor closures at once, then it's harder to stay afloat. That's typically the beginning of a downward spiral leading to ultimate extinction.

Here is the boom bust cycle of US department stores (clients of shopping malls).

Just a reminder, while e-commerce may be a factor to the retail sector's predicament, it has been a minor contributor. 

The share e-commerce sales to total retail sales was just 7.5% as of 4Q 2015. It was 7.4% in 3Q 2015. On a quarter to quarter basis, e-commerce grew by .1% or only 1.2% annualized. From Y charts

Well, symptoms shown above seem to replicate Philippine conditions, although the latter has been in the early phase of the inflection process.

As I have been saying here, the US Dead Malls and China’s Ghost Malls will serve as templates to the Philippine equivalent.

Socialism via QE: Bank of Japan 'Whale' Now Owns 55% of ETFs; also Top 10 Shareholder of 90% of Nikkei Stocks!

At the end of March I wrote,

In the political spectrum, the BoJ's increasing ownership of the factors of production simply means nationalization of assets or increased embrace of or the slippery slope to socialism.

Now for the proof.

From Bloomberg: 

They may not realize it yet, but Japan Inc.’s executives are increasingly working for a shareholder unlike any other: the nation’s money-printing central bank.

While the Bank of Japan’s name is nowhere to be found in regulatory filings on major stock investors, the monetary authority’s exchange-traded fund purchases have made it a top 10 shareholder in about 90 percent of the Nikkei 225 Stock Average, according to estimates compiled by Bloomberg from public data. It’s now a major owner of more Japanese blue-chips than both BlackRock Inc., the world’s largest money manager, and Vanguard Group, which oversees more than $3 trillion.

Wow, top 10 shareholder in 90% of stocks comprising the Nikkei !

Here's more. (bold added)

Under the BOJ’s current stimulus plan, the central bank buys about 3 trillion yen ($27.2 billion) of ETFs every year. While policy makers don’t disclose how those holdings translate into stakes of individual companies, estimates can be gleaned from publicly available central bank records, regulatory filings by companies and ETF managers, and statistics from the Investment Trusts Association of Japan. The BOJ declined to comment on Bloomberg’s findings.

The estimates reveal a presence in Japan’s top firms that’s rivaled by few other big investors, often called “whales” in the industry jargon. The BOJ ranks as a top 10 holder in more than 200 of the Nikkei gauge’s 225 companies, effectively controlling about 9 percent of Fast Retailing Co., the operator of Uniqlo stores, and nearly 5 percent of soy sauce maker Kikkoman Corp. It has an estimated shareholder rank of No. 3 in both Yamaha Corp., one of the world’s largest makers of musical instruments, and Daiwa House Industry Co., Japan’s biggest homebuilder.

If the BOJ accelerates its ETF purchases this week to an annual rate of 7 trillion yen -- the pace predicted by Goldman Sachs Group Inc. -- the central bank could become the No. 1 shareholder in about 40 of the Nikkei 225’s companies by the end of 2017, according to Bloomberg calculations that assume other major stakeholders keep their positions unchanged. It could hold the top ranking in about 90 firms using HSBC Holdings Plc’s estimate of 13 trillion yen.

Astounding, 55% of ETFs now owned by BoJ!

The BoJ's QE program, which has partly been intended to bolster the stock market, implicitly means the use price controls. Such tacit price controls were originally designed to favor stock market owners through the mechanism of increased demand provided by the BoJ and reduced supply from the public in order to push equity prices higher.

Yet increases in BoJ's share ownership of a corporation means decrease in the public's share ownership.  Remember, the BoJ buys these shares from the public. Hence, intensifying implicit price controls through the deepening of BoJ's asset buying extrapolates to the path of complete nationalization of the Japan's stock market.

Furthermore, as the BoJ increases its ownership in the stock market, liquidity is reduced if the BoJ does not sell. Eventually, the greater the BoJs ownership, the lesser the trading volume/liquidity. In essence, sustained BoJ QE would mean monopolization, and thus, the end of the stock market.

Additionally, sustained QE would translate to BoJ's direct and indirect control of corporate (internal and external) activities through its increased share of ownership. 

So instead of corporations focusing to serve consumers, these corporations would have mutated to become state owned enterprises (SOE). And priorities of such SOEs would instead be directed at the attainment of political objectives of Japan's political leaders. 

Moreover, with greater government interference, employment in these firms will likely be dictated by patronage politics

All these indicate that by virtue of sustained BoJ's QE, Japan's economy would likely transform into a socialist paradise overtime!

The great Austrian economist Ludwig von Mises was prescient, there is no middle of the road policy. Price controls, in this case BoJ's monetarism, only serve as one of the main channels to achieve socialism

But when this state of all-around control of business is attained, there can no longer be any question of a market economy. No longer do the citizens by their buying and abstention from buying determine what should be produced and how. The power to decide these matters has devolved upon the government. This is no longer capitalism; it is all-around planning by the government, it is socialism.

Phisix 7,250: Team Viagra (Log April 25), How Team Viagra Contributes to the Bubble

Just a reminder, based on government’s own Securities Exchange Commission SEC Code (section 24) mandate, "marking the close" supposedly represents an illegitimate activity ...

Apparently, because the establishment benefits from these, authorities seem to keep a blind eye on such incidences. Such is a manifestation of selective application of self-imposed regulations. When the establishment benefits, these rules become obsolete or irrelevant. 

Nevertheless, it isn't my duty to ferret out on these irregularities.

However, I feel that it is my task to reveal to the public of the anomalies that not only exists, but has rampantly been practiced by some unidentified unscrupulous entities at the PSE. 

Worst, such manipulations has contributed to the severe distortions on market prices of the Philippine equities. Having said so, falsification of market prices, which exacerbates on the mispricing of domestic securities, only reveals why the Philippine stock market has signified a huge bubble. 

As explained yesterday, these actions has contributed vastly to the immensely skewed distribution of PERs in the PSEi index. 

So while the average PER or the PSEi's PER has been at 18+ (as of April 21), that's because the lesser half of the PSE has LOW PERs (11.5). Issues from the latter half of the PSEi ranking have been least used in "marking the close" activities so partly explains their low PERs

However, the latter half's LOW PER essentially conceals on the marvelous 25+ PERs of the top 15 issues! And PERs at 25+ resembles that of 1996 levels! 

And a major the reason why PERs of the top 15 composite members have been at nosebleed 25+ levels has been from the contributions by the above manipulative practices!

I would add that if one would calculate on the average weighted PER of the PSEi this would show a stunning PER of 23.62!

This only shows that none of these has been about G-R-O-W-T-H, but about an amalgam of implicit subsidies or transfer of wealth process, price fixing operations, propaganda and the transmogrification of the Philippine stocks into a loaded casino den. 

And as I keep repeating here, there has been no country in this world that applies "marking the close" with such frequency, regularity and intensity!

Today marks another huge “marking the close” session courtesy of Team Viagra. 

The PSEi was down .32% just a second prior to the market intervention phase. Then all of sudden, at the runoff period, the headline index was down by only .07% So a stunning 78% of the session’s loss was wiped out because of “marking the close”! 

The audaciousness of the rigging of the Philippine stock market can be seen in practically the four major sectors, led by the holding sector. 

And the pump on the following issues has boosted the aforementioned indices

Note of unchanged prices of two issues (AEV and BPI--orange pre runoff prices) which suddenly zoomed at the close. This means that the entire or 100% gains of the day for the said issues had been a product of the end session pump!

As one would notice, the Phisix can’t stand on its own based on normal trading activities, so it has to depend on market manipulators to keep their artificial price levels up. 

All images above from Bloomberg, PSE, technistock and colfinancial.