Back in the day, there were three main daily newspaper sections. The first included world and national news. The second was devoted to opinion and local news. The third led with sports followed by business news consisting primarily of stock market prices.
The way the newspaper was constructed was based on what people wanted to read. Everyone wanted to know what was going on in the world. Fewer readers were interested in local society events and the opening of the new grocery store. Sports and stock market results attracted even fewer readers.
However, everyone who might read about sports was expert having a strongly held opinion on which team was going to be the champions. Stock market enthusiasts were even a smaller group and no one really talked about it except in conversations between those who invested.
These days—thanks to the Internet—almost everyone has an opinion on almost everything and to qualify as an “expert” means you have posted your opinion at least three times on social media.
During the 1997 Asian Financial Crisis, the most common thought and comment was, “What the hell is going on?!” Since the beginning of the global financial crisis in 2007, the most common comment is, “I know exactly what is going on and why.” The number of economic and stock market experts has increased 10,000 fold.
There was another reason that sports and stocks were in the same section. Both are low on the list of what is important. The only time news from either made the front page was a momentous event like a baseball World Series. Or, in the case of the stock market, a crash in prices.
Success in the world of sports is partly measured by trophies on display. In the stock market, it is the increase in wealth of the players. But neither has lasting impact for most people. In the Philippines the two intersected back in the 1990s when then-listed company Alaska Milk saw its basketball team win the championship. For the next few days, the stock price increased as if one had anything to do with the other.
Both sports and the stock market is a game played by a limited number of professional and amateurs.
We are told the stock market reflects the economy. Except dozens of studies over 30 years in 20 different and diverse countries prove that to be false. There is a “sweet spot” of economic growth that does affect the markets.
Too much economic growth limits stock prices, as you can make more money with a business. Too little growth reduces investing funds. But, otherwise, there is little if any correlation between a booming economy and a booming stock market.
The Philippine stock market is an indication of investor confidence according to the “experts.” Except, for 2013, the local stock market was flat and Foreign Direct Investment (FDI) increased by 50 percent. In 2015 the market lost 3.75 percent and FDI was up by 30 percent.
But doesn’t the stock market also reflect the actions of the President of the Republic? If that is the case, then certain quarters would be disappointed to learn that local stock prices were down 16 percent from the 2015 high to the 2015 low and up from the 2016 low to the 2018 high by 28 percent.
For the past two months, I have been telling my subscribers to stay far away from buying stocks unless they were active traders. And that had nothing to do with economics, politics or global events. It was because—just like in poker—the cards sometimes run sour, and you need to stand up from the table and walk away until the cycle changes.
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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.