Real situation

Intended as a subject dealing with the present status of the market, I can’t help but muse at how this also evolved into a source of controversy between two veteran news anchors, one foreign and one local, which led to the sudden “disappearance from public view” of the latter arising from the report made by the former upon arrival in Tacloban City five days after Supertyphoon “Yolanda.”

As he said, thinking he was “already late to cover the situation in the devastated areas,” Anderson Cooper of CNN observed that there was “no real evidence of organized recovery or relief.”

The report, at the same time, drew a picture of incompetence on the part of government, particularly by the national team dispatched to oversee recovery and relief operations, supposedly headed by Local Governments Secretary Mar Roxas, the husband of ABS-CBN’s radio-TV anchor, Korina Sanchez, Cooper’s arch critic on the report.

Looking at how the local netizens regarded the dispute, Cooper was right and Sanchez was just too affected because it involved her husband.

Not really my competency, but being exposed to management in most of my professional life, at the same time, bearing some personal knowledge about the devastated areas, both appear to have some valid grounds to support their points of view.

But, it occurred to me that, just like my following market commentary on the foregoing subject, it should not be a dividing issue but must serve only as the basis for greater study to do better in the market.

US market

The Dow Jones Industrial Average hit above 16,000 for the first time ever, last Thursday.  It cemented this with an additional net gain of 54.78 points or 0.34 percent on Friday to close at the all-time high of 16,064.80.

As described, this is the Dow’s “seventh week of advance, and its longest stretch of gains in almost three years.”  The rise in stock prices were propelled by improved employment data and retail sales.

But what gives the impression that the current US market uptrend is not exactly captivating and exciting, just like how the local market is treating it?

Ordinarily tracking the direction of the US market, the Philippine Stock Exchange index or PSEi, has been trending downward in the last three weeks, opposite the direction of Wall Street’s major indices.

One answer could be found in the Bloomberg Global Poll of investors of Nov. 19.  It showed that “four out of five investors expect the Fed to delay a decision to begin reducing its bond buying until March 2014 or later” and that “just five percent are looking for a move at its Dec. 17-18 meeting.” Whatever it would be, investors fear that the US economy is not at all in any shape to meet it, now, soon or beyond these dates.

It is also the sentiment of most economists that the “efforts to stimulate the US economy via $85 billion in monthly bond purchases are now hurting more than helping” the real growth of the economy. Therefore, it has to end.

They observe that the stock market is up because corporate profits are up.  But looking closer, they find that the profits realized are mostly the product of low interest rates.  They are not earned from real growth in revenues or operating versatilies, which they further declare are actually disappointing.

This is why “weak job growth” persists and “wage gains” remain.  These two concerns play a big part in the making of a robust economy.  With such a situation, the economy is still far from being robust, much less stable.

Interestingly, the DJIA’s current price-earnings ratio (PER) of 17 times remain much lower than the market’s observed twin peak of 17.5 times in October 2009 and 31 times in March 2000, according to data compiled by Bloomberg.

Bottom-line spin

Our local market sustained another weekly loss of 261.56 points or 4.12 percent last week.  This brings the market’s total loss to 500.54 points or 7.76 percent in three weeks of trading only.

Obviously, much of the explanation can be traced from the return of hot money to the US market with its ongoing rally.  Local investors sentiments, too, continue to be affected by the disastrous events that belatedly happened in the country—from the Zamboanga siege, the big earthquake in Bohol and part of Visayas, and the now devastation of Yolanda in Leyte, Samar, and parts of Mindoro, Cebu, Bicol and the Palawan regions.

Along with all of the above, there is this hanging fear that Wall Street is expected to tank—taking down along other markets, including ours—as soon as the US government will taper its monetary stimulus program.

Heavy as they are, especially in human lives, experts maintain that the toll on the economy by these local events will be “minimal and manageable.”  They are not expected to undermine the growth picture of the country. They can even serve to spur broad economic growth over the long run.

What can derail the country’s advance, according to experts, is “high labor and power costs.”  Our labor and power costs are no longer as competitive in the region.  As cited by the Joint Foreign Chambers to the government in August, Metro Manila has a minimum wage of $10.74, Myanmar at $0.52, Cambodia at $2.03, Vietnam at $3.15 and Thailand at $9.75.

Let’s continue next time the analysis of additional factors that could potentially pose a threat to the country’s ongoing growth and development.

The writer is a licensed stockbroker of Eagle Equities, Inc.  You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com