IT is the Christmas season and it is certainly proper to take the time to think of, and be thankful for, the good things in spite any disappointments we may have experienced.
Nonetheless, it is also the end of a year and a time for reflection and, perhaps, a reality check.
The Philippine stock market has had a marvelous seven-year upside run. But as we end 2015 it is likely— with about 12 trading days left—we may end in the red. Obviously, unless a stock-trading miracle occurs, we will not end at the 8,000 level.
There are harsh realities that need to be confronted. While not directly applicable to the Philippines, never in the history of the world has there been as large a wealth transfer from the middle-income class to the wealthy class as in the last years.
This is the result of the global “zero-interest rate” policies that have favored the debtor at the expense of the saver. Borrowing money to invest in the stock market helped create nearly 500,000 new millionaires in the US in 2014 alone. Since the millionaire population plunged in 2008, the US has gained or added back more than 3.5 million millionaires. The people who save their excess income—the normal middle class—are poorer today than before, and that trend is accelerating.
The median wealth of a US household, in inflation-adjusted dollars, dropped 36 percent from 2003 to 2013. In that same period, the richest 5 percent of households saw their median net worth increase by 12 percent.
“The United States government, during the past few years, at the behest of the big fellows who seek a monopoly of the game, has been raiding the little fellow.”
I put that last sentence in quotes because it is not mine. That was written by a man who went by the name of “George Graham Rice,” although his birth name was Jacob Herzig. He was more familiarly called “The Jackal of Wall Street.”
Herzig or Rice, wrote those words in his memoir, a book called My Adventures with Your Money in 1913, 100 years ago. Rice is the man that all stock-market manipulators—even in the Philippines—strive to be like.
Rice wrote: “You are member of a race of gamblers. The instinct to speculate dominates you. You feel that you simply must take a chance. You play the stock game. In the stock game the cards [quotations or market fluctuations] are shuffled and then stacked behind your back after the dealer [the manipulator] knows on what side you have placed your bet and you haven’t got a chance. When you and your brother gamblers are long of stocks, the market is manipulated down and when you are short or out of the market, prices are manipulated up.”
Fortunately, the local stock market has not been used by the “big fellow with the help of the government” to create a massive wealth transfer. However, we have seen many issues that have traded according the “Jackal’s” system. For example, one was unknown in March 2014 and traded at P1. By February 2015, the price was P3. Had you bought at the beginning and held until now, you would still be down 25 percent.
The formula is even included in My Adventures. “The more dangerous of the malefactors are the men in high places who take a good property [or company], overcapitalize it, appraise its value at many times what it is worth, use artful publicity and market methods to beguile the thinking public into believing the stock is worth more and foist it on investors at a figure that robs them of great sums of money.”
If that method of manipulation sounds familiar, then you can consider yourself a veteran of local stock-market trading. The core of the manipulation problem is always, and is still, an investor’s trust and at the same time lack of effort to avoid being “manipulated.”
“The information that is permitted to reach you as market probabilities through the financial columns of the daily newspapers is, as a rule, poisoned at its fountain. Few financial writers dare to tell the whole truth. Most of them are, indeed, subsidized to suppress the truth and to accelerate public opinion in the channels that mean money in the pockets of the securities sellers.”
Finally, Rice advises, “What is the lesson of my experience? This is it: Don’t speculate in Wall Street. You haven’t got a chance. The cards are stacked by the ‘big fellows’ and you can only win when they allow you to.”
But this is 2015 and the human race—or at least you—should be wiser and more knowledgeable. Do your own homework and figure out every hot tip is just another way to steal your money.
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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.