HAWAIIAN hurricanes—or what we in the Philippines call typhoons—are relatively rare events. While there are many large storms in that part of the Pacific Ocean, the Hawaiian islands usually do not suffer any damage from the wind, as the greater problem comes from storm surges.
In 1982 Hurricane Iwa directly hit the islands of Niʻihau, Kauaʻi and Oʻahu. The storm was the islands’ first significant hurricane since 1959. Because a major storm is so rare, it was party time on the Waikiki Beach, with all the bars and restaurants holding storm parties in anticipation of the hurricane making landfall in the late evening. The winds were 150 kilometers per hour. There was severe flooding, with most of those bars and restaurants left in knee-deep water.
Wanting to be ready for the all-night party, I took a late-afternoon nap and slept through the hurricane. Everyone else had great stories to tell of the destruction the storm wreaked. Buying an “I survived Iwa” T-shirt was the best I could do.
Twice this week, my normal sleep time passed while I was watching the destruction at the global financial markets. On each of those days, there were no bold headlines shouting what had happened the night before in the West.
No one took significant notice that the Russian central bank, in an unprecedented move, had raised its interest rate from 10 percent to 17 percent to protect the value of the ruble. Not one commentator noticed that the Dubai Financial Market General Index was down 7 percent.
The Philippines had slept through the typhoon.
Certainly, there has been talk about crude-oil prices being down 12.5 percent in a week. But this has been mostly in the context of local gasoline prices and the decrease in jeepney fares.
Meanwhile, at the Philippine Stock Exchange, we have not seen the massive daily swings for the last two weeks since this time last year. The experts are having a very difficult time trying to explain it all. Some of the analyses offered are just plain nonsense that show a lack of historical perspective and experience. The current situation mimics the 1997 Asian financial crisis. If you were there, you know what I mean. Many were not, and do not understand.
If lower oil prices are good for the Philippine economy—and they are—then why is the stock market on panic mode? If everyone around the world is rushing to hold United States dollars, why isn’t the peso crashing?
If the crash in crude-oil prices is a type of “black swan” event, then the swan is laying golden eggs for the Philippines. Philippine inflation tracks crude-oil prices, as does the gross domestic product growth rate. You can check the data for yourself at a number of websites that will provide you the information.
The major Middle Eastern oil producers do not intend to do anything to stem the drop in oil prices. Saudi Arabia said it was comfortable to let prices fall even to the $40-per-barrel area; so did Russia. Kuwait said there would be no further discussion about a cut in oil production until June 2015.
The Philippine stock market is falling because foreign money is fleeing. Maybe as much as 50 percent of the free float of local stocks is owned by foreign interests. Big foreign money all around the world is scared to death right now. Interest rates in the US are also falling, as these funds seek a hopefully safe haven in US government debt.
But the peso is not falling, even as all this money supposedly leaves the country. I do not believe the Bangko Sentral ng Pilipinas is supporting the peso-exchange rate. Either Christmastime remittances are offsetting the foreign money leaving or these funds are being parked locally, waiting for the selling climax.
To the foreign money: So long, and don’t let the door hit you in the back on the way out.
The next weeks may be rough for the stock market. Expect it. The most conservative, but probably not the most profitable, approach would be to wait for the economic numbers for the first quarter of 2015.
Sometimes, sleeping through a typhoon is the sensible thing to do if you are safe and warm.
Send me an e-mail at mangun@ gmail.com. Visit my website at www. mangunonmarkets.com. Follow me on Twitter at @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.