INQ7 MONEY - COLUMNS
August 01, 2006
Updated 05:06:27 (Mla time)
THERE will not be many jokes today because I am in bed with 'flu, I think that's her name. I have fever, soar throat and a runny nose, and the doctor said I got overexcited applauding the State of the Nation Address 130 times.
So na, I must rest but not before I tell you about my friend upstairs. He is getting old and cannot hear very well. He consulted his cardiologist about his loss of vitality and the doctor told him in a soft voice what to do.
That night, he visited one of the notorious clubs in Makati City and returned with a gorgeous 21-year-old girl with big boobs and a miniskirt. They stayed in his condo for a whole week without surfacing, and when I saw him, he looked positively radiant with good health and vitality.
He warmly shook the hand of his doctor and congratulated him on his excellent advice. The astounded doctor asked him what he had done. "I took your advice, doc, and got myself a hot mama, and boy do I feel great." The doctor was dumbfounded but eventually managed to stammer, "I said you have a heart murmur."
I waited for a really horrible, rainy day and revisited the Mall of Asia. This time around, there were relatively few people and we went shopping without being crushed to death. We tried the Super Bowl of China and their new dishes were excellent. So was the food. The manager was a chow mein fellow but the lights were too bright so I asked him to dim sum.
In a record shop, I bought Gregorian music, purely by chants.
My wife is taking a crash course in driving.
* * *
The US stock market had a pretty good week and on Friday, even the sluggish NASDAQ jumped 2 percent. About 75 percent of the second-quarter results have been announced. Some companies disappointed while others did extremely well, particularly the giant oil companies. Overall, most companies attained or exceeded analysts' expectations and on a year-on-year basis, profit continued to show double-digit increases.
Intel and AMD, the two largest US chipmakers, have been producing chips that operate at ever-increasing speed. As a result, companies have been investing in the new technology and productivity has risen 3.5 percent. The price war between the companies has eaten into both their profits but each one is determined to be the leader.
Only today, Intel announced a new chip, which is 40 percent faster than before and uses 40 percent less power.
Because these chips enhance new technology, companies are investing and the economy is becoming increasingly efficient. I see no danger of a recession.
However, Federal Reserve Chairman Ben Bernanke's problem has just taken a turn for the worse. It was announced over the weekend that the economy in the second quarter had slowed to 2.5 percent. This is a preliminary figure and may be revised but it is well below the analysts' expectation of 3.25-3.5 percent.
The slowdown is faster than expected so Bernanke will not want to raise rates again.
On the other hand, inflation has been steady at 2.1 percent with hourly pay and hours worked almost flat. But the latest data shows that "core" inflation has suddenly risen to 2.9 percent, way above the Fed's target of 2.0 percent. So, to prevent inflation from getting out of hand, he has to raise rates.
What is the poor guy going to do with this Catch 22 problem? I think he will raise rates once more and then pray for divine intervention.
I still don't understand why they use the "core" rate, which excludes food and energy. This presumes that Americans walk or cycle to work, while consuming only tap water and eating fruits and plants from their garden. This is totally removed from reality and Dr. Marc Mobius says that the true inflation rate is 6.0 percent.
I suppose that one might remove the price of crude oil from the equation if it is thought to be unsustainable, but is it? However, it is absurd to remove food prices.
In our local market, the Philippine Stock Index (Phisix), together with the indices in the rest of Asia and even Europe, has risen so as to mirror the movement of the S&P 500. This has been helped by steady investment in Philippine stocks, particularly TEL, AC, MERCB and SMPH.
Net buying has been averaging about P200 million a day recently so the gross turnover of P1 billion, or a little more, is not particularly impressive. In the good old days, turnover reached P4 billion a day, and if you convert the pesos into dollars, the low turnover is even more apparent.
The second quarter ends June 30 for most companies but so far, very few have reported.
MER announced profits down 31 percent from the second quarter of last year but foreign brokers continued to accumulate the stock, which remained unchanged. The reduced profit compares favorably with three previous quarters showing losses.
PERC announced a 30-percent stock dividend but this did nothing for the share price. On Monday, MBT reported half-yearly profits up 35 percent but the shares did not move in a very strong market. Over the next month, all companies must report or face suspension.
Analysts are optimistic that most companies will report higher profits than a year ago and I think they are correct. There is a seasonal tendency for stocks to rise one to two weeks ahead of results and then drift lower afterwards. I now include the dates when companies are due to announce their profits, as this information is valuable for short-term traders.
The government sold its final tranche of $300 million 10-year and $400 million 25-year bonds at very reasonable yields and the offer was oversubscribed 16 times. I am surprised that they did not exercise a greenshoe option to increase it to P1 billion.
The oversubscription certainly warranted it and shows confidence in the Philippine economy. This successful sale plus the daily net foreign buying have helped the peso to strengthen.
Iran's immediate rejection of the Security Council's ultimatum that they should stop producing enriched uranium poses a serious problem.
Assuming that all five countries agree to sanctions (this is doubtful), Iran has threatened to interrupt the flow of oil from the Middle East. This is potentially a far more serious problem than the Israeli-Lebanese conflict.
Condoleezza Rice must have been disappointed by the immediate rejection of a three-day cease-fire by both sides. So the fighting will continue for a few more weeks until both sides agree to a face-saving compromise.
http://services.inq7.net/express/06/08/01/html_output/xmlhtml/20060801-12789-xml.html
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