Thursday, January 20, 2005
Save Now: Buy Later
Some positive economic news is starting to flow, however caution is the key word. Do not expect any concrete benefits in the next several months. The economy will go worse before it gets better. Then as I said last week, the last half of this year will see our economic flower will begin to bloom….despite this administration’s lack of a coherent plan to reach the constantly talked up “10 Point Agenda”.
On that subject, the “10-Point Agenda” is a farce in the same way the U.S. Presidential loser John Kerry tried to use four months in Viet Nam combat to convince the voters he was a war hero. Having an “agenda” and constantly reminding the public that you have an agenda does not make you a successful “Economist” President.
As much as I hate his political beliefs, Jose Maria Sison on his website http://www.defendsison.be gives an accurate picture of the likelihood of the “10-Point Agenda” seeing any life. He is right, although saying that about Sison is a very bitter pill for me to swallow.
But enough about the President, who has a 10-point agenda in case you were not aware. On to you and me. The key word for individuals who wish to build wealth is “hoard”. I don’t mean rice or cooking oil; I mean money. Actually, the correct word is “Save” but it seems like most Filipinos detest the idea of “saving” money as much as most Americans do.
Both nations have a very low savings rate and a very high “spending” rate. That is, Americans tend to become buying consumers when they have extra funds (or an unused credit card limit). Filipinos tend to “invest” extra Pesos through all the entrepreneurial choices that come to us. Maybe that is why all these multi-level pyramid schemes work so successfully for the con artists. Given the chance to own our own business, Filipinos will raise the money. But neither nations citizens tend to put cash away in storage.
Right now though is a good time to hoard cash, for soon “Cash will be King”. My advice is don’t buy it if its not broken and that includes refrigerators, cars, and homes. If you can save ten percent of your monthly income for the next six to nine months, you will have stored a next egg that will reap a bounty and create wealth for you many times over.
Even as I say that we are facing higher prices over the next few months, at the same time we will experience a form of price ‘deflation’.
With the Peso stable and the stock market above pre-GMA levels, the President can say with confidence that those of us predicting gloom and doom are very wrong. And we are…for now.
However, soon all of negative pundits will be very right. Note this thought; 80 percent of Manila households surveyed said they would not be making major purchases in 2005. You should join them but be smarter by saving the cash you would have spent on those things.
Total vehicle sales slid 4.6 percent in 2004 mainly due to sluggish demand for commercial vehicles, an industry report showed a couple of weeks ago. Business usually cuts back first followed by the consumer. The results will be lower prices and better terms months from now.
That is why you need to save your cash to take advantage of it. Real estate will probably not fall in price, but there will be substantial discounts in high-ticket consumer goods both locally produced and imported.
The most important reason to save now and reap rewards later will be for budding business owners. Starting a business from the ground is much more costly and difficult that buying an existing operation small or medium sized. There are going to be significant numbers of business failures in the next months that will allow you to takeover and begin a new venture or expand your existing business interest.
There is a downside to saving money and that is that the bank interest rate in the Philippines is so low, that you might do just as well keeping your money in your refrigerator for the interest it is going to earn. Currently the best alternative to a bank deposit is to buy government Treasury Bills. You might as well take some advantage of the fact that the government, which, by the way, has a 10-Point Agenda, is still borrowing, particularly in the domestic market.
The other reason that you need to be accumulating cash reserves is that you may need extra funds if things do not go favorably in the third quarter ’05.
I am not a big proponent of maintaining large cash reserves unless you are preparing for a specific future purchase. However, there is too much medium uncertainty in the air and it is not coming from terrorists or self-proclaimed opposition leaders. My fear is that the President might be reading her own press releases, might believe that the 10-Point Agenda is realistic and attainable, and completely bankrupt the nation as she fails to accomplish it.
On that subject, the “10-Point Agenda” is a farce in the same way the U.S. Presidential loser John Kerry tried to use four months in Viet Nam combat to convince the voters he was a war hero. Having an “agenda” and constantly reminding the public that you have an agenda does not make you a successful “Economist” President.
As much as I hate his political beliefs, Jose Maria Sison on his website http://www.defendsison.be gives an accurate picture of the likelihood of the “10-Point Agenda” seeing any life. He is right, although saying that about Sison is a very bitter pill for me to swallow.
But enough about the President, who has a 10-point agenda in case you were not aware. On to you and me. The key word for individuals who wish to build wealth is “hoard”. I don’t mean rice or cooking oil; I mean money. Actually, the correct word is “Save” but it seems like most Filipinos detest the idea of “saving” money as much as most Americans do.
Both nations have a very low savings rate and a very high “spending” rate. That is, Americans tend to become buying consumers when they have extra funds (or an unused credit card limit). Filipinos tend to “invest” extra Pesos through all the entrepreneurial choices that come to us. Maybe that is why all these multi-level pyramid schemes work so successfully for the con artists. Given the chance to own our own business, Filipinos will raise the money. But neither nations citizens tend to put cash away in storage.
Right now though is a good time to hoard cash, for soon “Cash will be King”. My advice is don’t buy it if its not broken and that includes refrigerators, cars, and homes. If you can save ten percent of your monthly income for the next six to nine months, you will have stored a next egg that will reap a bounty and create wealth for you many times over.
Even as I say that we are facing higher prices over the next few months, at the same time we will experience a form of price ‘deflation’.
With the Peso stable and the stock market above pre-GMA levels, the President can say with confidence that those of us predicting gloom and doom are very wrong. And we are…for now.
However, soon all of negative pundits will be very right. Note this thought; 80 percent of Manila households surveyed said they would not be making major purchases in 2005. You should join them but be smarter by saving the cash you would have spent on those things.
Total vehicle sales slid 4.6 percent in 2004 mainly due to sluggish demand for commercial vehicles, an industry report showed a couple of weeks ago. Business usually cuts back first followed by the consumer. The results will be lower prices and better terms months from now.
That is why you need to save your cash to take advantage of it. Real estate will probably not fall in price, but there will be substantial discounts in high-ticket consumer goods both locally produced and imported.
The most important reason to save now and reap rewards later will be for budding business owners. Starting a business from the ground is much more costly and difficult that buying an existing operation small or medium sized. There are going to be significant numbers of business failures in the next months that will allow you to takeover and begin a new venture or expand your existing business interest.
There is a downside to saving money and that is that the bank interest rate in the Philippines is so low, that you might do just as well keeping your money in your refrigerator for the interest it is going to earn. Currently the best alternative to a bank deposit is to buy government Treasury Bills. You might as well take some advantage of the fact that the government, which, by the way, has a 10-Point Agenda, is still borrowing, particularly in the domestic market.
The other reason that you need to be accumulating cash reserves is that you may need extra funds if things do not go favorably in the third quarter ’05.
I am not a big proponent of maintaining large cash reserves unless you are preparing for a specific future purchase. However, there is too much medium uncertainty in the air and it is not coming from terrorists or self-proclaimed opposition leaders. My fear is that the President might be reading her own press releases, might believe that the 10-Point Agenda is realistic and attainable, and completely bankrupt the nation as she fails to accomplish it.
// posted by john mangun @ Thursday, January 20, 2005 
