PHILIPPINE politics continue to crowd out other issues in most newspapers. The two words that I take away from all the talk are “corruption” and “experience.” However, I firmly believe that the situation is going to get much more “exciting” and, at some point, the potential candidates will be forced to talk about another issue in specific terms—economics.
Economic issues for the political class in the Philippines usually come down to two words: poverty and “poor.” Maybe I am too cynical, but it seems like every politician’s ultimate campaign motto is, “I’ll promise to end poverty so that the poor will vote for me.”
The election will take place in May 2016 and, by then, we will have three more quarters—and one complete year—of economic data to look at. Remember that the first quarter of 2015 gross domestic product (GDP) growth was below expectations at 5.2 percent.
The latest GDP forecasts for 2015 are 6.2 percent from the International Monetary Fund and 6.4 percent from the Asian Development Bank. Standard & Poor’s is predicting 6 percent.
Everyone, if pressed hard enough, will disclose his or her personal choice for president. That is relatively easy to do when the election is some eight months away. Many things will change between now and next year. So let me offer this food for thought: Who would you vote for in May 2016 if 2015 GDP growth came in at 5 percent and the first two quarters of 2016 showed even slower economic growth?
Edward R. Dewey was an American economist who died in 1978. I mention his death because he was old enough to remember World War I and the aftermath, through the Great Depression and the boom of the 1950s, as well as the 1973 oil shock that changed the planet. He used gold coins as a young adult, then witnessed the US dollar become only a piece of paper.
Dewey was the chief economic analyst of the US Department of Commerce during the Depression and was part of the study commissioned by then-
President Herbert Hoover to find out what caused the Great Depression. Every economist that Dewey spoke to gave a different reason. Dewey then went on to spend the rest of his life studying cycles.
His studies with several important collaborators, such as sales guru “Og” Mandino, covered many fields to prompt Dewey to write in 1967, “More than 500 different phenomena in 36 different areas of knowledge have been found to fluctuate in rhythmic cycles.”
Of course, his ideas are totally dismissed by “real” economists primarily because, if the world operates according to rhythmic fluctuations that come on schedule, that would put many experts out of business. If an ordinary person could predict, for example, when the next full moon would come by counting its rhythmic cycle, we would not need wizards and shamans to protect us. Oh yeah…we all can predict the next full moon.
But, of course, economics depends on a huge interplay and the interdependency of human actions, as well as external events, and with the total free will for humans to take any action, rhythmic cycles would be impossible.
But the problem is that those cycles clearly exist. Sunspot activity follows regular cycles that then correlate to temperature and climate changes. Temperature and climate changes determined agricultural and economic success, that then correlated to the rise and fall of ancient empires back to the Sumerians. And every ancient government had its own economic experts.
Economist Joseph Schumpeter said that there were four economic cycles: Kitchin, Juglar, Kuznets and Kondratieff. Kondratieff Waves are used in some stock-market analysis. The idea of the Fibonacci numbers sequence is really nothing more than a rhythmic wave and regularly repeats itself.
Several “cycle guys” are calling for a major downturn in the global economy beginning at the end of September.
Believing that the stock market does forecast the future several months out, I think that recent downside market action since April only serves to confirm the change in cycle that is going to happen at the end of September. I believe that local stock prices have told us to expect many negative things happening in August and September, as a preview of the real economic damage that will occur in the fourth quarter.
As the bad economic news begins to build and with some major damage to the debt market, as the Federal Reserve does not significantly raise interest rate, if at all, the only option for money to be profitable will be the stock markets, including the Philippine Stock Exchange (PSE). I believe that we will see an historic high, and maybe historic highs, before the end of October.
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.
1 comment
“Historic highs before the end of October”….. I’ll drink to that!