Gus Cosio says so

Ideas on the Philippine Stock Market

Are you sure that “bully” means “excellent”?

1:40pm  Tuesday  4 August 2009   Philippine Stock Exchange Index  2886.96 (+1.83%)

“The more you chase money, the harder it is to catch it.”  Does that quotation describe how you feel?  This bull market has been going on since late March this year, and the ones that have not benefited from it are those who thought they did not want to chase the market.

In truth, our group had a hard time buying this market when the index was at 2100; nevertheless, we bought a little.  When it got to 2200, we were again stomped because no analyst was saying that the economy was out of the woods yet.  We bought again, but not in a big way.  The story went on as the index passed 2300 and 2400.  We kept buying albeit cautiously and in amounts we thought to be manageable.  Then, we thought that 2600 would be a resistance, and in fact, it appeared to have hit a wall at 2626.  It retraced to 2353 sometime in mid-June.  The market again showed hesitation above 2500 in late June, but in July, it ran like a fleeting gazelle over the plains.  It was tough to catch, but only if you waited for it to get cheaper.

When you get down to it, one reason prices continue to firm up is because stocks are cheap compared to other alternative liquid investments today.  What else can you do when the bank pays you next to nothing for your deposits?  In the money market, you get something like 3% net.  Big deal.  It is no surprise why investors are looking for more.

This bull is driving the market.  Some etymologists think that the term “bull market” was derived from the French term ‘bulle speculative’ which refers to a market bubble.  Others think bull is short for ‘bully’, in its now mostly obsolete meaning of ‘excellent.’  Whether we are forever blowing bubbles or are in search of excellence, time is a great equalizer.  So far time has been on our side.  At this stage in the game, I think the jury is still out and it’s anybody’s guess how this market will play out.  In time, we will know.

People feel that playing the market is akin to that of a blood sport.  The sight of blood makes a game a lot more engaging.  That is why they have bullfights.  I think that is why people think that bulls charge toward the color red when in fact it is they waviness of the bullfighter’s cape that attracts the beast.

Anyway, I’ve noticed tremendous constructive activity on the large cap shares and I see no reason why people should not accumulate TEL, GLO, AC, and the rest of the headline issues.  A lot of value can still be derived from them.  However, I think that we are at that stage when the best value for money are in the  small cap issues with good fundamentals.  I’m still positive on EEI and ISM.  They seem to be sitting on a pile of cash and solid earnings.  We can also start looking at issues like T, I , TUNA,  COAT and ION because these guys are producing real goods and services for both local and overseas consumption.  As the global economy recovers, the real producers should perform well.

There is still some juice to be squeezed out of this market.  Remember, the index components are made up of the large cap stocks.  If the index retraces, it will hit the large ones but not necessarily the small cap segment.  Over all, I’m happy to be in the market and will likely stay committed at this juncture.  There’s no sense just to keep money lying around when there is a raging bull running wild.


August 4, 2009 - Posted by | Financial markets in Asia


  1. Hi Gus, thanks for the post.

    A lot of analysts from bloomberg, financial times, and business week claim that the current bull run will go well into 2010, as markets slowly climb out from the deep recession of 2008-2009. While this may be good news for us, do you think the 2010 May elections of next year will stall or adversely affect the expected bull run for our market in 2010?

    Thanks, and more power to your site.

    Comment by bluelaw | August 4, 2009 | Reply

    • I cannot say with certainty that the 2010 elections will be good for the market but, historically, elections have sparked rallies. When Cory (God rest her soul) was swept into power after the 1986 elections, we had one of the strongest rallies ever. In 1998, the market also rallied after Estrada got elected in spite of the Asian flu. Of course, it tanked because of capital flight well into Erap’s presidency. In 2004, we had a belated recovery toward year end and rallied all the way to October 2007. Of course the strongest leg of the rally was before and after the 2007 mid term elections. The market favors democracy so my best guess is that an election is positive for the PSEi.

      Comment by Gus Cosio | August 4, 2009 | Reply

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