US GDP is expected to slow to 1.2% in the fourth quarter as tracked by the Federal Reserve Bank of Atlanta’s GDP, citing a slowdown in construction spending while US manufacturing has registered its 13th straight month of contraction, slipping 0.9% in November. US consumer inflation is expected to slip to 3.1% while the core rate, which strips out volatile food and energy prices, is seen holding at 4%. Both remain elevated but off the peak of inflation’s high rate in the summer of 2022 when the consumer price index hit 9.1%. The National Association of Business Economist (NABE) survey predicts USA inflation to continue moderating but doubt it will reach the Federal Reserve’s Board’s 2% target before year-end 2024.
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) however has been reported that it might maintain its current policy rate of 6.5% in its next meeting. Its hawkish stance remains similar to the present stance of US Fed. In fact, Fed Chairman Jerome Powell warned last week that the Fed may not be done with its hawkish rate hike cycle. It’s prepared to tighten monetary policy further if it becomes appropriate to do so.
We know that the Philippines, with a growing economy and a growing population, remains an attractive investment destination. Admittedly, our country has a lot of catching up to do; still there are some opportunities that may help push our economy to grow in the near future.
Our country recently registered a surprising 5.9-percent expansion in its gross domestic product in the third quarter of 2023, against 4.7 percent in the same period last year. Local inflation has slowed down to 4%, the lowest in twenty (20) months, and the other good news is about our country’s latest gross international reserves (GIR) that has increased to US$101.3 billion, considered adequate enough to finance at least three (3) months of the country’s imports and other payments of services. Keep abreast of our burning economic issues and what else needs to be done so we can all preserve our investments in stocks, bonds, foreign exchange currencies, and real estate.
By its very nature, investing involves an element of risks; sometimes but somehow things can still go wrong. The truth is no one beats the market all the time. One reason is that we cannot acquire complete knowledge of a company no matter how many financial documents are studied, or how good relationship the investors may have with both the senior management and company owners. The other reason, of course, has been emphasized time and again in every risk management book: The future cannot be predicted.
Laws and regulation don’t eliminate bad unethical and illegal behaviour. Determined scam artist still managed somehow to gain the confidence of the uninformed investing public, luring in more suckers in the process. Regulations have not stopped scam artists and probably never will.
In practice, doing due diligence is really a must; it is an investigation, audit, or a review to confirm facts or details of a matter under consideration. In the financial world, due diligence strictly requires the examination of financial records before entering into any proposed financial transaction with another party. Find time to undertake this important task.
In a way, one should never hesitate nor feel intimidated to ask questions; If the investment manager’s strategy isn’t making any sense, particularly when asked for explanations on the discrepancies, if any, from the investment benchmark. If he can’t make it clear enough, start thinking of replacing the fund manager immediately. Don’t just rely on supposedly good reputation (remember Madoff, whom many considered to have a very solid reputation as the chairman of Nasdaq stock exchange, but he masterminded the biggest Ponzi scheme in the world, estimated at $65 billion. The fact that fund managers were also referred by friends or relatives should not be given too much weight. Nothing wrong to do double checking.
What we’re really driving is this; we have seen scams in various forms and guises. That these scams are taking place daily seem to indicate that investors and regulators alike continue to pay lip service to serious concerns such as reputational risk, liquidity risk, strategic risk, and interest rate risk including the ballooning debts of both institutional and individual borrowers. Scary however way you look at it.
We know that, sometimes, fortune favors those brave hearts with analytical minds and with excess funds to start investing again. Our local stock market has been sliding down in terms of volume and value, but sooner than we think, there’ll be some good listed stocks that can be purchased at bargain prices. Just focus on those few listed companies particularly those with strong balance sheets, good cash flows, with clear cut business models, managed by honest, competent management team with owners publicly known, like the Ayala family, for utmost integrity and transparency.
The point is to stay the course. Be a disciplined patient and persistent long-term investor like the current legendary investor in Wall Street, Warren Buffett, who only owns very few listed companies, not even more than eight names. Short-term trading like going in and out of stocks or other investments based on short-term hopes may be exciting but over the long haul does not boost much the investors’ bottom lines.
Let’s also talk something else important. Fear isn’t something to be eliminated, but it’s something to be managed. Fear gets to be problematic when it becomes the investors’ focal point, dominating their thoughts and distracting them from doing their fully studied proactive moves.
So, before you consider investing in, or lending money to business enterprises or individual borrowers, don’t forget this advice: Lack of due diligence is bad to your wealth, and probably, with your health, too.
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Atty. Abelardo “Billy” Cortez is formerly FINEX national president. An independent board director previously at First Metro Investment Banking Corp. and he now also sits as independent board director in other First Metro companies such as First Metro Securities Brokerage Corp, First Metro Exchange-Traded Fund (ETF), PBC Capital Investment Corporation and First Metro Save and Learn FOCCUS Dynamic Fund (Metrobank Group). He is an awardee of the Most Distinguished Bedan Alumnus in the field of banking and finance from San Beda University.