Great Opportunities at Scary Times

The world continues to face a financial crisis equal to an intensity-10 earthquake that has never been experienced before. While this disaster does not directly bring danger to human lives, it has directly damaged wealth.

Over the past months, I have come across friends and family who have lost so much of their personal and family wealth during this financial crisis. I would say that close to 100 percent of those I know have lost so much. The range just depends. Maybe the luckiest person I know would have lost only 15 percent, but a number have lost up to 50 to 70 percent of their investments. If I were to name them one by one, my column space would run out. Many of them had placed a lot of their trust with their bankers to guide them on their investments. The problem is that many of these bankers use sophisticated instruments and derivative structures like accumulator, equity link notes, etc. The worse thing is that many were encouraged to leverage their portfolios to increase the returns of investments. When people borrow and leverage, their portfolio and assets drop in price. It is a certainty that they will be on margin call. This means that they have to add cash, or else the banks will start selling their assets to meet margin calls.

To some extent, Filipinos are more of bond investors than stocks, unlike investors in Hong Kong, China and India who have a higher weight on stocks. But still, a lot of Filipino investors have invested in emerging market bonds that have dropped to levels that were never seen before. Even investment grade bonds have also dropped tremendously. I would consider the Philippine bonds as an exception, since we have fared very well as compared to other Asian bonds.

The only ones spared in this crisis are those who have stayed in cash, or those who have invested only in the Philippine corporate and government bonds. The Philippine stock market has gone down to current levels of 1,900, from its high of about 4,000 index. Ayala Corporation, BPI and PLDT are coming close to the lows of the 90s. Even our own RFM Corporation is trading at 0.23 cents. That results to a market capital of 900 million pesos. The funny part is that our 50 percent share in Selecta with Unilever alone is worth more than P1.5 billion today, excluding the many other parts of RFM. You can see the amount of paper wealth destroyed in the past six months. It is sad to say that if this continues next year, we should see property values coming off. Many have been hurt in their investments. If margin calls will be made, people will be forced to sell their prime real estate.

Who do we blame for all these? The banks that we trusted have a great role in this mess, aside from the many complicating structures they have created for their clients. Banks have paid a price for these mistakes. Many of the banks, if not all the banks in the world, are trading at half of their values and some even at 20 percent of their high. If not for the support of the Feds last week, Citibank would have been in serious trouble. Hopefully, banks and investors will learn from this.

A good friend of mine who did very well buying Benpres sees the Dow Jones at 4t next year. Another chartist who I have listened to and who follows the Elliot Wave (a way of reading the charts) feels the same way too. There is a lot of fear that the worst will happen in ’09, which happens to be the Year of the Ox. We are indeed in scary times, but I still believe that the Philippines should still come out as one of the Asian stars that will perform in ’09.

My appeal is for those who want to change our constitution before 2010, we suggest people to start first the debate in 2009 on what is the best form of government. Maybe let us also get a provision to state that in 2010, those elected in the senate and congress will form into a constitutional assembly. But, let the people decide if they want Con-ass or a Constitutional Convention. Whichever is voted, full implementation on political changes should only happen in 2016. The needed changes on economic provisions of the constitution can be made effective immediately. There is nothing wrong in reviewing the constitution, but timing and perceptions must be considered. Any form of amendment before 2010 become negative to a lot of Filipinos, since they look at it with suspicion in extending the president’s term. As I explained to friends from the opposition, PGMA will not extend her term. She wants to see our democracy continue, especially in times like this. But yes, it’s time to start the debates on whether Mar Roxas’ Concon or Conass should be the way to review and change the constitution and what provisions must be revised to adjust to the current environment.

Last Friday, I was invited to attend the launching of Sen. Manny Villar’s “Pondo sa Sipag, Puhunan sa Tiyaga.” It is basically a program that will search for microentrepreneurs nationwide who have been doing well, amidst the challenges they face. Under the program, the awardees will be given P100,000 financial assistance that could give them a better chance to move up from micro to small. As I was listening to Sen. Manny Villar’s message, I noticed that it was exactly the same message I tell people during our caravans. He talked about the need for a change in attitude, which is what Go Negosyo wants to see. Manny’s line “Sipag at Tiyaga” is very similar to what Go Negosyo promotes in Filipinos. These are the values of many Filipino-Chinese entrepreneurs. As Go Negosyo was born, it came along with the line “sagot sa kahirapan.” The need for a new revolution, an entrepreneurship revolution, is what this country needs. While I work as a consultant on entrepreneurship for PGMA, I believe that we need to see more men and women realize that the solution to poverty is the creation of more negosyos.

It is important that every presidential candidate has a clear vision on how they intend to solve poverty, and on how they would encourage and support microentrepreneurs to move up the ladder. Governor Vilma Santos-Recto also has a good handle on how to create a negosyo climate. Governor Lray Villafuerte, as well, is a very enterprising leader. We saw that same intensity in the Negosyo programs of Jon-jon Mendoza of Bulacan. My thrust is to get local governments to take the lead in developing a negosyo climate in their respective provinces. The local officials shall be the Negosyo champions in their areas, and rightly so, because they can make a difference in improving the lives of their constituents. We aim to replicate the Go Negosyo model for mindset change and entrepreneurship empowerment to all provinces and localities in the country, as the way to propagate on a sustainable basis the huge advocacy to change the Filipino culture and mindset. The goal is to get all government agencies and private associations in their areas to support the enterprising leaders and the people in each province.

While India and Thailand have huge problems, this presents us with more opportunities to build the grassroots for a more meaningful growth and development. More call centers and BPOs would locate in the Philippines, and not just in Metro Manila. In fact it is already happening in other cities outside Manila. With everything else that is happening, especially in the promotion and development of hundreds of tourist destinations, more tourists are expected to come to the Philippines. This presents a lot of negosyo opportunities. The next President of this country must take the entrepreneurial success of the Arroyo administration to another level. This is our chance, and Yes, The Filipino Can!