With all the constant talk and analysis about the stock market, you might be under the impression that it is important. No, the Philippine stock market is not important.
But isn’t the stock market a way to measure economic performance? No. The Venezuela stock exchange index was up 400 percent in 2015. Since 2009, the New York stock exchange has increased by 150 percent. This is also the worst eight-year economic growth period in the history of the US.
You want to measure the Philippine economic performance, go to any major department store on a normal Saturday and count the cashier booths that are open. Less than 50 percent is not good. Long lines are good.
Isn’t the stock market an indicator of political stability? “Political stability” is a “yes or no” proposition.
If the government is closing down the media and press, and arresting journalists, the situation
is not stable.
But what about government approval ratings? Don’t people buy shares if they like the government’s performance? No. As of September 8, 70 percent of US voters think the nation is going in the wrong direction. The last time it was below 50 percent was in 2009.
The one thing that we know that is important about the local stock market is whether foreign money is coming in. Actually, no. “Foreign money” is just like “local money”. It is greedy, paranoid, erratic, impulsive, unpredictable and—did I mention—greedy.
When foreign funds flow into the stock market, the experts caution that this is called “hot money” for a reason. It can come out at any time for any reason. Yet, when the hot money does leave the stock market as it has been doing for a couple of months, everyone suddenly goes crazy that the world is coming to an end.
You cannot have it both ways. Either foreign portfolio investment is the economic foundation of the Philippines and without it we might, as well, apply to be a Spanish colony again. Or, it comes in and out based on a variety of factors like currency exchange rates, geo-economics and local interest rates, and the time of the year. Further, does “foreign money” speak Chinese, Japanese, English, German, Swedish, or Thai and does it move all at the same time in or out?
Sometimes “foreign money” buys the local stock market at the high (1997) and sometimes, it sells at the low (2009). Other times it buys at the low (2013) and sells at the high (2015)—just like you and I do.
Listening to talk about the stock market is like listening to the six blind men describing an elephant. Most everyone has no idea what he is talking about because he analyzes from a particular perspective.
A banker, politician, economist, stockbroker, journalist, or stock trader sees something different. The elephant is not remotely like a tree, a wall, a rope, or a fan, even if it may seem that way. Likewise, the stock market is just a vehicle where people buy and sell shares trying to make money. Nothing more, and nothing less.
****
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.