The world is a confusing place.
Exactly one year ago, when the Philippine Stock Exchange Composite Index (PSEi) was reaching a new historic high, government officials and stock-market analysts were repeatedly telling me that the market was accurately reflecting the great economic conditions in the Philippines. Now, those same experts are saying that the PSEi is not accurately reflecting the great economic conditions that we are experiencing.
It is difficult for a simple-thinking man like me to know what to believe anymore. I see the PSEi down 10 percent in 2016, while an economist-supporter of a particular presidential candidate tells me that economic growth has never been any better in the last 30 years. Yet, when I look at the annual economic growth measured on a quarter-on-quarter basis, the trend has been going down for 24 months. In the middle of 2013, the growth was 7.9 percent and the last quarterly number is 6 percent.
It is also difficult to believe that on January 5th, I wrote to “Expect the best, plan for the worst, and prepare to be surprised.” I said that because I am surprised how little time I have had to plan for the worst, which seems to be coming every day.
William the Conqueror of England ordered the “Great Survey” of most of England and Wales in 1086. In Middle English, it was called the Doomsday Book, later in the 12th century it was called the Domesday Book. The book was basically a tax assessor’s record of all landholdings and livestock in the kingdom.
One hundred years later a court bureaucrat, Richard FitzNeal, wrote: “For as the sentence of that strict and terrible last account cannot be evaded by any skilful subterfuge. That is why we have called the book ‘the Book of Judgement’…because its decisions, like those of the Last Judgement, are unalterable.” The final “judgment” comes on “Doomsday.”
The year 2016 is already shaping up to be a year of judgment or doomsday. But remember that, as in a court of law, after the verdict or judgment then comes the sentencing and that will be in 2017.
One thing you learn as a parent is that the simpler the language of a lie, the more serious the problem probably is. “I sort of forgot to turn in one of my projects” might easily mean “I didn’t turn in any of my projects and have failed the class.”
In his recent State of the Union speech, US President Barack Obama said, “Anyone claiming that America’s economy is in decline is peddling fiction.” That does not seem so bad, does it? The largest retailer in the world, Walmart, is closing 200 stores worldwide this year. But Walmart has 11,620 locations. No big deal. Dunkin’ Donuts is closing 100 of its 8,000 stores. Again, no big deal…or is it? Dunkin’ Donuts reported that same store sales are up only 1.1 percent over last year, as fewer customers came into each store.
Small changes like this in an economy can easily be dismissed as “peddling fiction.” Except, a whole lot of little things always add up to a big situation. No one anticipated that a simple survey of land and livestock in 1086 would still be used even in the 21st century to track who owns what land and if proper taxes have been paid to the King through a few hundred years.
There are many things going on that will negatively and severely impact even the Philippines in 2016. The Capesize class cargo ship is the largest in the world, too large to pass through either the Suez or Panama canals, forcing these vessels to go around the Cape of Good Hope and Cape Horn. At the peak of the shipping boom in 2008, it cost $250,000 a day to hire a Capesize ship. Today it costs $2,600 per day. Maybe there is just an oversupply of these ships and not a drop in cargo.
The Federal Reserve Bank of New York publishes its Empire State Manufacturing Survey index, which dropped in December to the lowest level since 2009. Total US industrial production last December fell at an annual rate of 3.4 percent. Never before in US economic history has industrial production been so low without the country next moving into a recession.
There are a dozen other little things that do not promise good things for 2016. Did you ever have one of those 10-second brownouts that was just enough to turn off your desktop computer and then the real power cut came an hour later? That is what 2016 is going to be like. And I believe the stock market is always accurate.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
1 comment
Bro, it seems the cause of all this trouble is China (and not only in the WPS). The Chinese investors are not savvy, stock investing is like playing mahjong to them. So, they have the full 2016 to get their acts together, and hopefully, come 2017, Chinese stocks won’t be so volatile and erratic anymore. My prediction? 2017 will be better than 2016.