Tuesday, April 30, 2013

Financial IQ: How do you get rich.. marry someone rich!

English: Rita Hayworth on the cover of an Arge...
English: Rita Hayworth on the cover of an Argentinian magazine (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

There are a number of ways to get rich.  One is to marry a rich person... though, this seldom happens. :)


It's not very often that we can say this, so we're pleased to announce: One of fashion's very own is becoming a princess!

Model Kendra Spears is engaged to Prince Rahim Aga Khan, son of His Highness Aga Khan IV, Imam of Shia Ismaili Muslims. The 24-year-old American beauty will marry her 42-year-old fiance in an upcoming Muslim ceremony, according to a press release on the Aga Khan's web site.

You've likely seen Spears grace catwalks for Marc Jacobs, Dolce & Gabbana and Chanel, as well as pose in the pages of Numéro and international editions of Vogue (or maybe you heard of that little "model war" she started?). As The Telegraph notes, the brunette is marrying into a family accustomed to beautiful brides: Her fiance's father was married to British model Sarah Croker-Poole and his grandfather was married to Rita Hayworth. And we thought Princess Charlene had big shoes to fill...

Of course, we're not 100 percent sure Spears will take on the title of "princess" just yet (even though that's the official title her father-in-law's ex-wife was given), so we'll have to wait to get too excited. But formalities aside, an American-turned-royal really is a dream come true for us. Spears seemed pretty excited herself once news broke on Friday, tweeting, "Thank you all for the kind tweets! We're very excited! :)"


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Sunday, April 28, 2013

Financial IQ: 5 possible companies to buy-and-hold

English: logo of Banco de Oro
English: logo of Banco de Oro (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

Interesting take.  Marvin's five long-term companies to hold are: Metro Pacific Investments (MPI), Ayala Corporation (AC), Banco De Oro (BDO), Jollibee (JFC), and SM Prime Holdings (SMPH).  What is your take?


Just some items that I want to point out and clarify before I give my mythical five stocks:

  1. I really don’t do Buy and Hold as part of my strategy.  I continually buy stocks in my long term portfolio and just don’t buy one time big time.
  2. If you want to employ buy and hold your timeline must be longer to maximize the gains from both capital appreciation and dividends
  3. If you plan to put money on a steady pace on a monthly basis it would be best to do peso cost averaging.
  4. As you know like in basketball, offense wins games but defense wins championships.  So the best place for you to get far over the long term is to make a good combination of stocks.  Some stocks which will be offensive in rapid bull markets and some stocks that will be your defensive anchor during bad markets.  The key is to create a good team that will that will be good in both offense and defense.


Here are the Mythical Five:

  1. Center – Metro Pacific Investments (MPI) – As the center is the anchor of the defense in every basketball team, MPI is one centerpiece that should be in your portfolio for years to come. First it is an ultra defensive stock that will stand the test of time.  It is exposed in almost everything that is essential that every Filipino needs – electricity, water, hospitals, and toll roads!  This are the bare necessities that we as country would need and I think no amount of recession can close this company down!
  2. Power Forward – Ayala Corporation (AC) – The power forward plays a similar role to the center as it is their responsibility to protect the post, make the rebounds, and score close to the basket.  As they are known for their sheer size and stability the same is true with Ayala Corporation!  One of the biggest conglomerates in the country gives you the exposure to growth and large earning potential via its property development and mall operations courtesy of Ayala Land and it’s ever profitable BPI.  It also has a facet of a defensive stock as it can give you a steady source of cash flow from Manila Water and Globe Telecoms
  3. Small Forward – Banco De Oro (BDO) – The small forward is the most versatile position in basketball as it they are positioned in a way that they get to score either inside or outside, rebound, run with the guards, and do almost anything that the other positions can do.  The same is true with BDO, it is the biggest bank in the country and as the economy grows banks have the biggest exposure to almost every industry imaginable.   As the economy expands banks make the biggest money.  As Ayala Corporation already has BPI you already have a good exposure of banks under your arsenal.
  4. Shooting Guard – Jollibee (JFC) – Michael Jordan, Kobe Bryant, and Dwayne Wade.  This are prolific scorers who at one point or another have taken game winning shots and have brought scoring when it counts the most.  This is what we can see in Jollibee as we see its business just rake in cash every time.  Jollibee continues to deliver and expand not just in the Philippines but now the world is becoming its playground.  This is a consumer story, that as Filipinos get richer and richer you can expect more of Jollibee, Mang Inasal, Red Ribbon, Greenwich, Chowking flourish in the country!
  5. Point Guard – SM Prime Holdings (SMPH) – The point guard sets the pace of the offense, delivers the ball and makes everything cohesive.  That’s what SMPH does!  Like Jollibee you can see an SM Mall in almost every major location in the country!  That trend will continue to increase as more OFW remittances come into the country and our BPO industry continues to increase you can expect more people spending and spending money!  As this happens you can see SMPH as a stock setting the pace in increasing your portfolio!


As you can see this are all varying stocks with different functions, stories and sources of earnings.  What’s good about this is that for every season either in a bull or bear market your portfolio is covered and protected.  Some may perform better than the other at certain times but over the long term this stocks will complement each other and give good returns to your account as a whole.  This are all stocks also that you can hold and sleep well at night.  These are companies that are earning, led by professional managers who over the years will take these corporations further!


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Friday, April 26, 2013

Financial IQ: BPI's Sale on April 26 - 28

SM Mall of Asia
SM Mall of Asia (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

Just in case you are near SMX Mall of Asia, you can check out BPI's sale... and entrance is free if you have any BPI cards.


Big Summer Outlet Sale
Date: April 26, 2013 - April 28, 2013
Venue: SMX Convention Center Hall 4
Time: 10:00 am - 9:00pm


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Thursday, April 25, 2013

Financial IQ: How do you pick stocks?

Technical analysis
Technical analysis (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

How do you buy stocks?  Is it based on rumors?  Or do you buy based on fundamentals, technical, or both?  Or do you follow the herd?


This brings me to the technique used by one of the legendary market traders of all time, Richard Wyckoff.

Wyckoff, in his study of the market, took close notice of the difference and changing nature of the market. Out of his study, he found out that market changes are the result of actions led by speculative activity, price actions within the market, and the need for investment value.

He came out with what he called “10 vital traits” of these different market actions and used them as a step-by-step selection criteria and decision model to trade (or buy and sell) stocks.

“The 10 traits were split among three groups or categories.” These are the “corporate related (based on trends of the fundamentals), industry related (based on trends of business in general), and technical related (based on technical swings in the market.”

Thus, like in the foregoing example, his model will first address which of the market’s group category is ruling over its movement. He will test them with the “vital traits” that has to appear in some determined sequence before making a decision and course of action.

His method is as well the combination of fundamental and technical analysis. Thus, his stock selection and trading method is governed by the following five evaluation steps: The first is to “determine the present position and probable future trend of the market; second, select those stocks that are in harmony with the market—in a bull market stronger, in a bear market weaker, using the idea of relative strength; third, select those stocks that have built a cause for a potential move in keeping with one’s goals.”

“Fourth, use point and figure charts to determine how far the stock is likely to move. Determine the stock’s readiness to move and then analyze the standard price and Point and Figure charts with the help of the 10 buying and selling tests.”

Fifth, guide your decisions and course of actions with the generally applicable technical laws that govern all market behavior and direction.

With his methods, Wyckoff became wealthy “that he eventually owned nine and a half acres and a mansion next door to the General Motor’s Industrialist, Alfred Sloan Estate, in Great Neck, New York (Hamptons).”


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Tuesday, April 23, 2013

Financial IQ: Bond rates declining

Secret to Wall Street Riches Revealed
Secret to Wall Street Riches Revealed (Photo credit: C. K. Hartman)

Financial IQ Philippines Quick Hit(s):

Coupon rates of bonds keep getting smaller.  There are other financial instruments that give better return than bonds... and yes, some of these instruments offer fixed interest as well.


HIGH LIQUIDITY in the financial system and expectations of a rate cut of the central bank’s special deposit account (SDA) rates are projected to push down the rate of the fresh three-year Treasury bonds at the auction tomorrow.

Bond traders interviewed by phone last Friday said the three-year debt papers may settle anywhere from 2.125% to 2.25%, or 3.5-16 basis points lower than their 2.285% rate at the secondary market last Friday. 

“There is so much liquidity in the system as shown by the latest Bangko Sentral ng Pilipinas’ (BSP) SDA data,” a trader said.

As of Feb. 22, a total of P1.855- trillion funds was placed in SDAs, up 2.37% from the P1.812 trillion parked as of Jan. 25, latest central bank data showed.

In a separate phone interview, another bond trader said: “Expectations of a cut in SDA rates after the Monetary Board’s meeting [this] Thursday could also be priced in by dealers in their bids so we could see lower rates at the auction.”

“Market players expect the central bank to slash SDA rates by 50 basis points to 2% amid manageable inflation and expectations of more capital inflows in the country after the Philippines notched a credit rating upgrade from Fitch,” the trader added.


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Sunday, April 21, 2013

Financial IQ: What is up with Gold?

English: 1 oz (Troy ounce) of fine gold Deutsc...
English: 1 oz (Troy ounce) of fine gold Deutsch: Eine Unze Feingold mit Zertifikat (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

Historically, gold performs opposite of equities.  Since most equity markets are rising, gold is declining.


Fundamental reasons behind the drop

To better understand why gold prices fell as much as they did, we will enumerate below the fundamental reasons behind it.

1. Sluggish global economic growth – With the global economy slowing down, it means that inflation is no longer a primary concern. In fact, the concern now is deflation. Hence, investment in gold has lost its priority.

2. Benign inflation – The consumer price index (CPI) numbers coming out recently are pointing towards low inflation. Since gold is viewed as an inflation hedge, this is bearish for gold.

3. Search for yield – With low interest rates brought about by global monetary easing, as well as benign inflation, investors looked for assets that can provide yield. Unfortunately, gold has no yield, making it unattractive to them. Thus, they buy high dividend yielding stocks and high yield corporate bonds instead.

4. Flight to equities – The all-time highs reached by indices in the US and the Philippines shows that investors have been allocating their funds into equities. A consequence of this move into equities is less demand for gold.

5. Shift to defensive stocks – Investors are looking for companies that have stability of revenue and earnings growth. These companies do not require a strong economic recovery to grow their earnings. This is why consumer stocks like Pepsi and Kellogg, as well as pharmaceutical companies like Johnson & Johnson and Pfizer, have been performing well in the stock market. At the end of the day, everyone still has to eat and take medicine. On the other hand, gold is cyclical in nature and has no earnings.

6. Hunt for countries with stable growth – Investors have also been searching for countries whose growth is not dependent on exports or a healthy macroeconomic environment, like the Philippines. So while gold prices have been dropping, our stock index has been making new highs.

7. Strong US dollar – The strong US dollar has caused the prices of gold and other commodities to soften. While a weak US dollar has worked to the benefit of commodity prices, its strength in the past months has caused commodities to become cheaper in dollar terms. Gold is the clearest example of this inverse relationship.

8. Fear trade waning – Investors normally flock to gold when there are fears of another financial crisis. However, the measures of central banks have alleviated these fears. Thus, investors have no more need to buy gold.

9. Insurance no longer necessary – Portfolio managers normally allocate 5 percent of their portfolio to gold. It acts as an insurance against a possible financial crisis. With the concern of a financial collapse dwindling, they began trimming their positions in gold.

10. Drop in demand from China and India – Demand for gold in India and China is also slowing. According to the World Gold Council, more than half of the world’s gold demand came from these two countries. Therefore, any drop in demand from them will have a significant impact on the price of gold.

11. Shift from commodities to equities – In a regime of low global growth, commodity funds tend to underperform. The switch from commodity funds to equity funds has also hurt the fundamental underpinnings of gold.

12. ETF liquidation – With goal losing its attractiveness as an investment or even a hedge, investors liquidated their holdings of gold exchange-traded funds (ETFs).The largest gold ETF, GLD, experienced $15 billion in outflows so far this year. As an asset-backed ETF, it would have to sell physical gold whenever investors redeem their shares, sending the price of gold spiraling down.


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Wednesday, April 17, 2013

Financial IQ: Merger of Stock and Bond Exchanges

Philippine 100 peso bill
Philippine 100 peso bill (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

It will be a big win for Philippines Exchange if fixed-income can be integrated as they would be more transparent for everyone.


The unification of the Philippines’ stock and fixed-income exchanges is finally taking shape as the two bourses, with much prodding from financial regulators, have agreed to restart discussions with the aim of formalizing an engagement within a 90-day period.

The Philippine Stock Exchange and the Philippine Dealing System Holdings Corp. (PDS Group) are back in “serious” talks and this time, their leaders have committed to the government that they would come up with a workable framework and sign a memorandum of understanding (MOU) within 90 days, several sources privy to the discussions confirmed to the Philippine Daily Inquirer.

The PSE mandated JP Morgan as financial adviser on the proposed transaction, noting that the American investment bank was very familiar with the equities bourse and its balance sheet. “They (JP Morgan) will do a valuation study,” one PSE source confirmed.

For its part, PDS tapped Maybank ATR Kim Eng Financial Corp. to value its financial market infrastructure and advise it on the prospective merger with PSE. PDS is the holding firm for fixed-income trading platform Philippine Dealing and Exchange Corp. (PDEx), Philippine Depositary and Trust Corp. (PDTC) and Philippine Securities Settlement Corp. (PSSC).

“We have a 90-day timetable to get things done,” one PSE source said. “We’re confident this will happen this time around.” The source added that the prospective transaction was the reason why the PSE was now seeking a substantial increase in its authorized capital.

Although the framework has yet to be finalized, the PSE is preparing to have enough shares to use as currency for a prospective merger through a share-swap deal. Last week, the PSE’s board approved an increase in the bourse’s authorized capital to 120 million shares from 97.8 million with a par value of P1 a share partly to cover a stock dividend declaration equivalent to 12.21 million shares.

But at present, the PSE has issued only 61.26 million out of its 97.8 million authorized capital stock, which means it has ample leeway to cover its latest stock dividend declaration. A check with several sources from the PSE and the Bankers Association of the Philippines (BAP)—the single-biggest controlling stockholder group in PDS with a 27-percent interest—confirmed that the PSE was preparing for a merger-and-acquisition (M&A) activity involving PDEx.

One possibility was to pursue a plain merger between the two bourses while another scenario was for the PSE, being the more established exchange, to buy PDEx, one PSE source said. In either case, the PSE would use its shares to swap with the other shareholders of PDEx. The unified bourse could be called something like the “Philippine Exchange,” the source said.

The PSE owns 20 percent of PDS while Singapore Exchange Ltd. owns another 20 percent.

Banking sources said the new BAP leadership headed by Rizal Commercial Banking Corp. president Lorenzo Tan has started to work with the PSE on the MOU.

What is different this time is that regulators—the Department of Finance, the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas—will be closely watching the progress of the unification.


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Monday, April 15, 2013

Financial IQ: Balancing BIR tax drive

English: Mr. Noynoy Aquino
English: Mr. Noynoy Aquino (Photo credit: Wikipedia)

Financial IQ Philippines Quick Hit(s):

Hopefully, individuals who are planning to go into businesses are not discouraged by all the tax implications.  Looking forward where... the government can find the right balance in pursuing taxes and increasing the number of individuals going to businesses.


One of the very first directives that President Benigno Aquino III issued to revenue-generating agencies when he assumed office in 2010 was for them to stamp out tax evasion and smuggling.

The President’s orders were specific: for the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to file cases every week against individuals or companies suspected of having deprived the government of much-needed revenue for its social programs.

His message was clear: It’s no longer business as usual under his watch.

The orders were followed to the letter. Cases have been filed every week, with the BIR and the BOC taking turns bringing complaints before the Department of Justice (DOJ).

Three years on, however, many cases are languishing in various stages of the legal process. To this day, not a single tax evader or smuggler has been put behind bars.

Yet Internal Revenue Commissioner Kim Jacinto-Henares is not just unfazed, she is supremely confident she can put at least one tax dodger in prison before she bows out in three years.

“No one has been put in jail—except for one conviction where the person involved is now a fugitive—but the program is working,” she said in an interview.

That program is the BIR’s Run After Tax Evaders (RATE) campaign which was conceived and used with mixed results in the previous Arroyo administration, but has now received a fresh boost in the Aquino administration.

In the country’s history, only one person—businesswoman Gloria Kintanar, accused of evading payment of P6.3 million in tax liabilities on her Forever Living products distributorship—has ever been convicted by the courts and given a jail sentence. However, Kintanar remains at large since her 2012 conviction, Henares said.

BIR records showed that, to date, tax authorities have filed a total of 160 cases against individuals or companies suspected of having welshed on their tax obligations. The respondents include large multinational corporations, professionals like doctors and athletes, government officials, and even television and movie celebrities.

Of these cases, 138—all but 22—remain with the log-jammed DOJ in various stages of prosecution (80 have been “submitted for resolution”).

Twenty cases are pending before various courts. Of this number, 18 are with the Court of Tax Appeals or regular courts, one at the Court of Appeals, and one at the Supreme Court—the P5.5-billion tax evasion complaint against businessman Macario Gaw.

Two cases have been dismissed by the DOJ. In one, the subject of the complaint was found to have been deceased, and the other was determined to be a case of mistaken identity.

All told, the BIR estimates that these suspected tax dodgers cheated the government of as much as P42.1 billion in unpaid taxes—money that would otherwise have been used to fund government social programs, provide better health services to the underprivileged, build public school classrooms or repair deteriorating roads and bridges.

For Henares, the administration’s failure to secure a conviction is not indicative of weak cases, but rather of a legal system that goes to great lengths to protect the rights of individuals—even if they are suspected to have injured the state through acts like tax evasion.

Henares believes that every single complaint that the BIR has brought to the DOJ for prosecution is “airtight.”

“Otherwise, if it’s not airtight, it’s harassment,” she said.

“But we have to convince them,” she said.

http://business.inquirer.net/116743/160-cases-filed-not-one-tax-evader-in-jail-but-bir-drive-is-working

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