IF we took the time to make a list, there are at least a dozen solid reasons why the global geopolitical and geo-economic situation is going to hell in a hand basket through the rest of the year.
In the “Golden Age” of US newspapers, long before television, the rule was that “If it bleeds, it leads,” meaning the worst news is what people wanted to read and the most negative headline sold newspapers. “Partially Clothed Starlet Found Murdered In Alley” combines the best of the public’s fascination with both sex and violence, and gives the chief of police a great opportunity to call a press conference. Nothing has changed in the past 80 years.
The unholy alliance between the press and media and the politicians in government fuels the obsession for bad news. Run a headline that says “OFWs losing jobs to low oil prices,” and the government will jump on the occasion to tell everyone how much on top of the situation they are. Of course, when you read deeper, the problem is not immediate and is only speculation.
The genuine and serious problems are almost always ignored because the politicians cannot do much to prepare and their efforts would be wasted anyway.
For example, the Baltic Dry Index tracks daily the cost to charter a cargo ship to move freight around the world. The index is at an historic low—and in a major downtrend—which means there is low demand for shipping because of falling trade. Fortunately, the Philippines is not dependent on export trade for its economic survival.
Checking the local newspapers, there have been only two stories about this situation in 2016, the last being three weeks ago. But there is no political mileage from “Baltic Dry Index Crashing.”
But we do get stories like “British envoy finds PH energy investment policy ‘illogical’” because the Philippines limits foreign investment in “renewable energy,” while encouraging foreign investment in conventional power generation. What the British ambassador fails to mention is that his country spends $670 million each year to subsidize diesel generators to provide backup power because wind power is unreliable.
Of course, the foreigners would love to have the Philippine government give them huge subsidies for renewable-energy development since their own countries are rapidly abandoning this policy that is costing so much. Rest assured, the Philippine government is studying the ambassador’s comments.
The more negative news, the more we will head into a deflationary period, which I will discuss in detail next time. The more negative news, the more investors stay away from stock-market investing. That is why caution must prevail in your investing and spending right now. However, don’t take all the negatives too seriously.
As I pointed out last September, we have entered a transition period from money flowing into the public sector and instead into the private sector, which includes the stock market. Transitions always come with a lot of pain, and the pain is not over yet. We are still in the middle and any sunshine you see may just be the eye of the typhoon and not the end of the storm.
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.