Turbulence up ahead, fasten your financial seatbelts!
November 1st, 2008 by blackshamaI don’t really know but is it due to my blogging here that some big honcho financial folks invited me for drinks in a tony Makati watering hole last Thursday? Of course I have known these folks before (some of them I knew from college,three big bankers and one exec in S’pore) but why should they invite a science academic?
It turns out that they wanted to hear the economic “tsismis” from UP. But I told them that the School of Econ website has the “tsismis” but its couched in academese. I also advised them to attend ALL THE CENTENNIAL LECTURES! Nonetheless I briefed them about the latest bloody struggles in academe, the question of where to get the cash to improve profs pay?, research grant allocations cut etc. Now that UP is largely on its own (as a result of the new charter), the question of money comes at a wrong time. It seems that the Charter is a good idea at a wrong time.
For instance there is a bill in Senate committee “Government Classification and Compensation Act” that updates the Salary Standardization Law (SSL). Since UP ain’t part of the SSL anymore,if in an act of pre-election generosity, the politicians double government salaries, we won’t be part of it! UP has to find its own money.
Anyway the S’pore based exec with huge interests in China says that Singapore has been savagely hit and jobs are falling off like autumn leaves. I was surprised to know that in China 30% of the new rich had their money in the stock market. The money is now pffft and with it middle class aspirations. So according to him we are not that bad. None of the middle class is in the predicament as some Chinese. Public participation in the stock market isn’t very big.
But the whole night was about what would be the first and second quarter effects of the global recession on us ordinary Pinoys especially the business outsourcing industry and retailing. The larger than expected retail slump is expected before the summer as parents save up for school fees. But it is all official now and not “tsismis” as the Finance Secretary just said. Government plans to accelerate spending on infrastructure.
The advice from the financial biz whiz is to 1) save and tighten belts, 2) if you have investments that aren’t losing that much, let the bad weather pass on, 3) if you have investments that are risky, get out now, 4) invest in yourself (go back to school!), 5) buy dollars! (They say we may hit 60:1 next year according to the S’pore based exec) and most important 6) hold on to your job. Those in the civil service have the best job security.
I’m no economist but what do think of these advice?
November 1, 2008 at 10:50 pm
those advice are not applicable to the many unemployed people in our country. it is only applicable to the elites and the middle class. I could care less.
but you made a good point on linking the article:
“Asked how the government would address this, Teves said: “A combination of accelerated implementation of infrastructure programs, making sure this time this infrastructure spending is done in a larger way during the first semester of the year to take advantage of the good weather, continued investment in food, agriculture.”
agricultural and national-sufficiency is a good advice to our corrupt country. Maybe we should be vigilant on how these infrastructure programs are being implemented and manage. As teves said, making sure it is done in a larger way, could it mean-larger way of corruption? 2 quarters of US recession are enough quarters to harvest agricultural goods.
there’s a time that a certain program must be implemented, let’s see how our political leaders enhance their time management skills.
Philippines is a strong society with a weak State- not the other way around ( to benigno) :)
November 1, 2008 at 11:10 pm
There’s always an opportunity in a crisis: BLSH = Buy Low, Sell High.
Prices of stock,including RP’s market, are way down. Market capitalization lost around 250 billion pesos in one day.
If you have cash to spare long-term (i.e. you won’t need in say 5 to 10 years) you could buy the Philippine blue chips: San Miguel, PLDT, Ayala, and SM. These companies produce goods and services which are in a way necessities.
November 1, 2008 at 11:26 pm
I was surprised to know that in China 30% of the new rich had their money in the stock market.
Even the rich oligarchs in Russia are victims of the world recession. Their wealth are mostly from stock investments.
their businesses thrived on bank loans given by the government. now that those loans are drying up, they are in trouble. no expansion in their global businesses.
November 1, 2008 at 11:29 pm
The people believing in the Singaporean economic model has to be slapped by this truth.
November 1, 2008 at 11:48 pm
IMHO, good advice Blackshama. (Although, i’m not much of a currency speculator so i wouldn’t know anything about that 60:1 forecast.)
Early this year, i as talking with a Banking software vendor and he said that US and European based private banks were setting up left and right in Singapore because they were positioning themselves for the 1 Trillion US Dollars worth of worth of savings by the Mainland Chinese. Perhaps that’s now down to a couple of hundred billion.
November 2, 2008 at 6:25 am
I prefer my simpler and more coherent koans as I mentioned previously; Focus on:
:) Self-sufficiency — being able to produce domestically what is consumed locally in order to;
:) Reduce unhealthy and un-secure dependency on global trade and reliance on unnecessary shipping of goods.
:) Simplification of the concept of economic value tying it squarely back to production and tangible assets all sustainably created through;
:) Domestic capital creation — an ability to rely on one’s own inherent cleverness to create physical, intellectual, cultural, and (ultimately) financial capital indigenously.
November 2, 2008 at 6:27 am
There’s also the effective protectionism option.
If we shut our ports to cheap Chinese celphone trinkets (among other useless things we import) — our consumption-driven economy will slow down.
This will have a triple effect:
:D Pinoys start feeling the pinch and spend less.
:D Whatever remaining Pinoys who have cash to spend will have lesser stuff to spend on.
:D A bigger chunk of household incomes (specially incomes sustained by OFW dollars — remitted by whatever is left of the overseas labour force) will remain parked in bank accounts.
If you open up a society of chronically commercially unproductive millions to a competitive market, that’s asking for trouble. And we are feeling it now and even before this whole crisis.
November 2, 2008 at 7:04 am
great policy benigno, let’s do it. :) seriously
November 2, 2008 at 10:37 am
it’s better to go the entrepreneurial route. financial crises always bring opportunities, especially for innovators. you can think of ways on how to sell innovation, either in services or products.
for example, if you have a water refilling station, why not innovate and sell beverages. or flavored water. that would be fun and profitable.
November 2, 2008 at 4:30 pm
Spot on Patricio. There is always opportunity in crises. Unlike some people who see crises as showstoppers that only the Government can get them out of (yet another case study of loser mentalities).
November 2, 2008 at 5:10 pm
The Russian billionaires are now asking the Kremlin for help.
If I am not mistaken, the Kremlin ran to the oligarchs,once upon a time.
The Kremlin must help them before they turn into millionaires.
November 2, 2008 at 5:12 pm
Re: ’save and tighten belts’, good for the individual or family but may be bad for the economy. Paul Krugman explains The Paradox of Thrift which is the vicious cycle of consumers holding back on spending which results in slowing down the economy which further results in loss of income by the consumers which results in less spending and so on and so forth.
November 2, 2008 at 5:39 pm
Yes CVJ,
that is why the subsidies of the us government(last year) were called stimulus packages.
November 2, 2008 at 5:48 pm
Which goes to show that we should not simplistically dismiss the role of government just like that (as Benign0 has done at 4:30 pm)
November 2, 2008 at 10:22 pm
“it’s better to go the entrepreneurial route. financial crises always bring opportunities, especially for innovators. you can think of ways on how to sell innovation, either in services or products…. Patricio.
typical example: war in iraq. bonus given to soldiers who enlisted, “college” funds were earmarked for soldiers after their tour of duties; more humbees, body bags, helmets, bullet proof vests, ammunitions productions and productions of more war materials.
these funds fueled to some extent the economy of the U.S. and the funds circulate mostly inside the US contrary to claim of the democrats that the money were spent mostly in Iraq. The crisis in Iraq makes the war industry in the U.S. profitable again.
Mr. Marcos’ theme against Sergio Osmena during the presidential campaign before he declared martial was that while he was a guerilla Mr. Osmena was in steel industry that manufactures ammunitions for the Japanese. The Japanese occupation provided the steel industry some business.
the melamine food scare created a crisis in food that momentarily created opportunities for home grown industry of goat, cow and carabao raisers in the rural areas.
the crisis in the government that profelled an almost daily or weekly demonstration in Metro Manila created an opportunity for manufacturers to produce more canvass for placards or paper mache for effigies, more gross sells from street vendors peddling food, water and softdrinks, or more street cleaners to clean up the mess on the streets and therefore created jobs for the poor.
the crisis in the government created opportunities for media consultants that are paid generous sums to repackage the image of our politicians.
indeed a crisis provides plenty of opportunities. :)