My Attempt in Forecasting Market Volatility

My forecast in the Philippine Stock Market will be volatile in the month of September. The reason being is that on September, The Federal Reserve System (FED) will have a policy meeting on September 17-18 and on that date the tapering of the FED’s $85 billion stimulus will be discussed.

Why are people so afraid of that?

Because currently the FED is printing money to buy bonds and since investors are selling the bonds that the FED is buying, the proceeds will theoretically go to the economy or other investment vehicle like the stock market. To illustrate:

FED1

The FED’s $85 billion monthly bond buying expands the FED’s balance sheet. With that in mind, we can say that we can measure impact of the FED’s stimulus in the US stock market by correlating the FED’s Balance Sheet and S & P 500 index.

FED2

The above chart reveals that every time the FED’s balance sheet goes sideways, S & P 500 index goes volatile as show in the enclosed points below:

FED3

Bloomberg reported this August 15,2013, 10 PM:

U.S. Stocks Drop as Economic Data Fuel Stimulus Concern

 

Do I think that the FED will taper the $85 billion stimulus this September?

In my opinion, no the FED will not but there will be great uncertainty that an investor can exploit before the policy meeting results will come out.

How do I think it will affect the Philippine economy?

In my opinion, not substantial to merit any negative concerns or a downward change in forecasted earnings.

How should an investor take advantage of this information?

In my opinion, wait in cash and take advantage of the “expected” market volatility.

 

 

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.

Disclosure: See Portfolio page for my holdings.

Power Crisis, FED may End QE Program, Stock thoughts: 2GO

Power Crisis

News like this stimulates investment ideas:

http://www.interaksyon.com/business/59131/mindanao-power-crisis–cagayan-de-oro-is-regions-bright-spot-but-only-until-this-year

FED may End QE Program

Ending the FED QE program by year end:

http://www.bloomberg.com/news/2013-04-10/fomc-minutes-show-several-members-saw-qe-over-by-year-end.html

“The Federal Open Market Committee members “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end,” according to the record of the March 19-20 FOMC meeting released today in Washington ahead of the regularly scheduled 2 p.m. time.”

I wonder how the US bond market will react should it happen…..

Currently, US prints money and buy assets such as bonds. It is an effort to inject liquidity directly to the economy which is called Quantitative Easing.

In the Philippines, the BSP only adjusts interest rates to stimulate economic activity.

 

2GO

To those who are curious about the Company:

https://fundamentalenthusiast.wordpress.com/2013/04/11/2go-group-inc-pse-2go/

Learning from Mistakes, PH to Sustain 6% growth, Stock thoughts: ACR, LTG, MEG

Learning from Mistakes

Do you often hear these words?

“I should have bought stock X a year ago and I should be enjoying xx% gain now!”

“I should have followed my friend and I could have gained a lot!”

Do not fall into this type of thinking.

Thinking shudda-cudda-wudda will not help you become a better investor.

Look forward. Sharpen your saw even more. 🙂

 

PH to Sustain 6% growth

It is exciting to know that they expect the country to grow 6% until 2016:

http://www.businessmirror.com.ph/index.php/news/top-news/11871-phl-to-sustain-6-growth-adb

 

Learn more about the breakdown of the GDP here:

https://fundamentalenthusiast.wordpress.com/2013/02/13/my-common-sense-approach-in-interpreting-the-gdp/

 

ACR

ACR reminds me of TA. I’ll take note of this. 🙂

Looking for partners to finance 400 MW coal-fired power plant:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2820_ACR.pdf

 

LTG

LTG to declare follow-on offering at 18~20.50:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2832_LTG.pdf

More on LTG:

https://fundamentalenthusiast.wordpress.com/2012/10/28/making-sense-on-tdy-consolidation/

 

MEG

I appreciate MEG’s move to raise funds:

http://www.interaksyon.com/business/59108/megaworld-announces-return-to-overseas-debt-market

A good way to exploit the low interest rates. 🙂

Blog, US Jobs

Blog

A good blog for new investors (can also be for the experienced):

http://www.oldschoolvalue.com/blog/articles/

LOTS of useful information.

He recommends the following books for new investors that have no accounting background:

http://www.oldschoolvalue.com/blog/best-investment-books-for-value-investing/

 

US Jobs

Actual jobs missed forecast:

http://www.forbes.com/sites/steveschaefer/2013/04/05/u-s-adds-paltry-88000-jobs-in-march-unemployment-rate-at-7-6/

It would likely mean that the Fed will keep on stimulating the market.

Investment Grade, If

Investment Grade

A good article from inquirer about investment grade:

http://business.inquirer.net/115075/what-will-investment-grade-status-bring

If

A poem worthy of reflection:

http://www.poetryfoundation.org/poem/175772

The first time I read the poem above in college it made no sense to me but now that I gained experience in life, the poem perfectly describes what a great person should be. 🙂

Airline industry, Rice, Stock thoughts: EDC, FGEN

Airline Industry

Good news for Philippine airline companies:

http://www.interaksyon.com/business/56325/good-news–philippines-successfully-addressed-aviation-safety-concerns–icao

They can now fly directly to US and Europe. 🙂

 

Rice

This sounds so good:

http://www.interaksyon.com/business/55809/philippines-aims-to-export-300000-mt-of-rice-by-2016

More investments in the Agricultural sector can drive our country’s GDP higher.

More on interpreting the GDP:

https://fundamentalenthusiast.wordpress.com/2013/02/13/my-common-sense-approach-in-interpreting-the-gdp/

 

EDC

EDC’s series of bad news made EDC’s price plunge.

Suspension of operations of BACMAN:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1871_EDC.pdf

Landslide:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1908_EDC.pdf

Assuming that BACMAN would not resume operations, the worst EPS that EDC could report is P.49. The market overreacted today, even reaching 6.03 lows.

Bought EDC for my hypothetical conservative portfolio @ 6.72 last Friday

 

FGEN

I completely understand why EDC should go down much but I do not comprehend why FGEN too.

EDC contribution to FGEN is only 20%. My forecasted EPS for FGEN excluding BACMAN’s possible contribution would be P1.97 at 13x PE we can have an intrinsic value of P25.