Gus Cosio says so

Ideas on the Philippine Stock Market

Knock, Knock!

4:00pm   Thursday   June 25, 2009   PSEi  2467.56 (+2.14%)     PHP/US$ 48.20

I was away yesterday to do some personal errands.  When I came home and checked the PSE website in the afternoon, I saw that the market had rebounded 45 points, although it did not impress me because it lacked volume.  However, today, I am seeing a different story.  I’m seeing a market that has kept its resilience in spite of a five day pull back.  Yesterday, I thought the move was just a bounce.  Today, headline stocks, in fact the 3 largest capitalized in the PSE – TEL, ALI and AC – led the most actively traded list.

What does this tell us about what lies ahead?  I think it shows that investors are very much inclined to taking greater risks at this point.  Reading the news from New York overnight, the U.S. Fed chairman – Ben Bernanke – said that the “pace of economic contraction is slowing” and noted that financial markets had generally improved while consumer spending had shown signs of stabilizing.  Such pronouncement only indicates that the U.S. central bank was no longer worried about deflation which to my mind was the greatest threat to the global financial markets.

Given such a backdrop, I am inclined to agree with the lot of domestic investors who are driving this market.  It is looking to me like a market which will, at worst, allow investors to break even on their money.  That to me is a risk/reward proposition that is tough to ignore.

Nevertheless, one should not neglect the need for a trading strategy.  Recklessness of any sort, be it in driving a motor vehicle or managing money, only results in losses.  By putting available market information in perspective, we will be able  to identify reasonable buying levels and appropriate price regions where to take profits .  While I would put an 80% weight that the longer term (12 to 18 months) trend  is up, I think that the short term trend will be range bound, i.e. that individual stock prices will be kept within a band. This is simply because the global and domestic economies are still tottering.  What sparks a sustained break-out in prices is the prospects of very strong underlying growth in corporate earnings.  Right now, no matter what crystal ball or tea leaves I look at, no images of such strong growth appear.  What is apparent, however, is the willingness of investors to bet on growth.

Fortunately, there can be greater returns to be squeezed from a portfolio when the market is in a trading range.  One only has to be both diligent and patient in following the the highs and the lows of the range.  Frankly, the conditions that we are in today will truly reap for us who keep involved in the market an invaluable lesson in portfolio management.  It’s what my dad referred to as the “school of hard knocks,” and there is no better teacher than the experience we get when we wear our hands out.  One thing for sure though, our brains do not wear out.


June 25, 2009 - Posted by | Financial markets in Asia

1 Comment »

  1. We often blame government corruption as the ultimate reason for the retrogression of Philippine Society. With due respect, government corruption is not the basic problem. There is more behind it which I would call the “cause behind the cause.”

    The cause is absence of an implementing law for Article II, Section 1, of the Constitution, the people’s power clause in the constitution, and the implementing law is a judicial device that would enable the people to decide in justice either to accuse in court a powerful grafter and to hear, try, and decide to convict for imprisonment such guilty grafter even if he or she is the corrupt and plundering President. Sending such characters to jail with the people’s power in justice is the most effective solution that will force them to respect you, the people.

    Why is the jury system a very powerful device in justice? Because it is YOU, the ordinary and common citizen – rich or poor – once you sit in a jury chair, and not the politicians, that will decide to send them to jail.

    The judicial device I am referring to is the Jury System that both establishes the Grand Jury and Trial Jury system. It is patterned after the concept of the U.S. Federal Jury system which DOES NOT REQUIRE PRIOR LEGAL EDUCATION of ordinary citizens from serving as jurors, unlike the jury system in most other countries such as Japan, Russia, Spain, among others. What is nice about the U.S. Federal Jury System is that there will be around 60 million adult Filipino private citizens all around the country that can qualify to serve in such system if adopted in the Philippines. The people who serve as jurors while being seated in the jury will be supervised and educated by judges to learn the law applicable to each particular case and taught how to serve for jury duty but the judges will have no power to dictate your decision as a juror. On the other hand, you will even be protecting the judges from illegal intrusions of powerful public officials, including the president, or else such officials can subjected to an accusation by you if you are a member of the Grand Jury, also composed of private citizens, for Obstruction of Justice without seeking permission from any public official in filing its accusation in court.

    Because government corruption under the present set up of the Philippine justice is a government monopoly, do not expect, and we must not expect, that the President or Congress, and most lawyers who fool their clients, will ever initiate the herein recommended solution because the Philippine justice system is very much controlled by such characters which they use to protect themselves from their own acts of corruption. The Philippine Justice system is flawed and their bread and butter in serving the people. It is only through our own efforts as private citizens that we must find the means to enact the jury system through the use of the Philippine Initiative Law, Republic Act 6735.

    I also have already prepared the draft of the proposed IR&R (Implementing Rules & Regulation) to be officially known as the “Rules of the Jury System” (or “RJS”) which will be essentially needed once the proposed law, the People’s Jury Initiative is already approved by the people under RA 6735. I have also written a master plan how this initiative can be adopted either before the end of this year 2009, or as a “twin candidate” of any aspirant to the senate or to the presidency in the coming election.

    I would be delighted to send you the drafts I mentioned above.

    Thank you for your attention.

    Marlowe Camello
    Bar Membership: California and Philippines
    Homeland, California

    Comment by Marlowe Camello | July 5, 2009 | Reply

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