The Recent Stock Market Panic-Selling Proves a Lot of Filipinos Have Low Financial Literacy

Just reading the news today from Inquirer Business about the recent panic selling. I'm not surprised given the financial and economic illiteracy in the Philippines. Here's an excerpt that gave me multiple reactions in regards to how they reacted to the bear market:

Philippine stocks waded deeper into bear territory on Wednesday, with the benchmark index losing another 2 percent as fearful investors continued to dump their holdings over global recession worries and the falling peso.
Stock brokers said the pace of selling had slowed from Tuesday’s bloodbath, which saw the Philippine Stock Exchange Index (PSEi) plummet nearly 4 percent, amid early estimates on the damage to agriculture caused by Typhoon “Karding” (international name: Noru).

Yesterday, the benchmark measure fell 2.33 percent, or 140.39 points, to 5,879.68 while the broader All Shares index lost 2.12 percent, or 68.59 points, to 3,165.64. One retail-focused broker described panic selling from many clients over the past two sessions.
Normally, they give a [sell] price. But now, they just tell us to sell at the market at the best price available,” he told the Inquirer.
Removing block trade transactions, market volume was also lower on Wednesday versus the previous session as 815.8 million shares valued at P6.8 billion changed hands. Net foreign selling hit P588.99 million, data from the stock exchange showed.

Just reading the entry made me laugh and facepalm at the same time. I really think about all the stupid comments I read via Facebook. I couldn't get over the stupidity behind the panic selling. Some even went as far as to blame incumbent Philippine President Ferdinand R. Marcos Jr. Some even commented that maybe this wouldn't happen if former Philippine vice president, Maria Leonor Gerona-Robredo, won the presidential race. Such ignorant statements are prevalent making me laugh. If Mrs. Robredo won, I doubt it she would magically fix it as some fools demand Marcos Jr. to do so. Such an action done out of ignorance (namely panic selling) is another stupid move.

I feel these people have been buying high then selling low (read here). It should be considered a very stupid move. Nobody in business ever makes a profit from doing that! When you buy stocks--you buy inventory of a piece of ownership in a company. If I buy from an index fund--I buy pieces of ownership from that index fund. The Philippine Equity Smart Index Fund from ATRAM would give me pieces of ownership of companies like SM, Ayala, and Jollibee to name a few. Buying stocks directly by handpicking means selecting a certain amount of stocks for that specific company.

Did the panic sellers spend more time listening to social media gossipers over financial geniuses?

This reminds me I wrote a post talking about why you should listen to Warren Edward Buffett over social media gossipers (read here). I also wrote a joke about obtaining a Master in Arts in Relaying Information Through Exaggerated Storytelling (MARITES) in Management and Economics (read here). One harsh joke I wrote was about investing in Intrigador Financials (read here) managed by people with a MARITES in Management and Economics. Sadly, some people would rather spend time on Facebook reading gossip from comments. It's stressful writing down facts because they're bound to ignore them. They will come up with one excuse after the other just to enjoy their blunder.

Buffett has his famous quote to buy when there's blood on the streets. This can be referred rather symbolically. The blood here can represent the lower prices of stocks, the stock market going down, and people who panic-sell. That's why we tend to use the word bloody as an idiom. Bloody idiot doesn't mean such people are literally bleeding. You have to bleed to succeed doesn't necessarily mean literally cutting yourself to succeed. Saying that my sweat and blood went into the cake means to put all effort into making that cake. Yes, there's blood on the streets right now as foolish investors spent their sweat and blood to panic-sell as the Philippine Stock Exchange index (PSEi) crashed. According to Inquirer Business, it even caused the Philippines to get stranded in a bear market.

If they listened to Buffett--they would've probably decided to either continued cost averaging (which removes all feelings) or buy more when stocks are priced low. It's like how I devote myself to a certain sum per month then buying more when stocks are low. It's because what I want to value is my time in the market instead of solely timing the market. Timing the market, that is, buying more during low times work. Timing the market before lump summing works. However, panic-selling isn't definitely one of the market timing techniques. In my case, I time the market to buy more through value averaging.

What foolishness can be done after they panic-sold

Knowing that a a considerable amount of Filipinos are so ignorant about basic finances and economics are one thing. Some may have been buying high amounts of stock during a high period instead of doing the opposite. I've heard a lot of stupid statements said regarding foreign direct investments (FDIs). I'm not a bit surprised (either) that these same people are now making uncalled for statements. Instead of holding on to good stocks (and sell only the bad ones to minimize losses)--they decided to sell the good ones with the bad. If they were invested in equity funds--they'd probably sell it now even if these are all good stocks. Any equity fund linked with the PSEi are from good companies.

What do you think such people will do with the money then? I would like to point to some past articles I wrote to give you some answers. One of the articles I wrote was about saying AXA is a scam while playing Axie Infinity thinking it's an "investment" (read here). I could imagine what if somebody pulled out his money from AXA based on some fake reviews on an untrustworthy site. The money gets liquidated then they decided to play Axie Infinity hoping to get the money they want. In short, there would be a considerable amount of people who are going to go gambling instead of investing (read here). I could imagine that the money they get after panic-selling (which there's no profit in them) will be gambled in hopes of "higher returns".

Some people might prefer to start "investing" into cryptocurrency. I remembered watching Trust No One: Hunt for the Crypto King (read my review here). It's not really that surprising to know how the Quadriga-X scam fell apart. I'm amazed that some people still "invest" into cryptocurrency. It reminds of Ruja Ignatova of Bulgaria, Germany. I was wondering are people thinking of how cryptocurrencies rise faster than stocks? The downside is cryptocurrency will crash faster than stocks. Stock market crashes aren't as instantaneous as cryptocurrency crashes. Yet, I wouldn't be surprised if people who sold their individual stocks (or equity funds at the wrong time) will use the money (sold at a loss) to be in the cryptocurrency market.

How to profit from the folly instead of participating in it?

Buffett says, "Profit from folly than participate in it." This requires good temperament to succeed. I believe there's probably a good number of people panic-selling right now. As I was told, "Don't be among the stupid even if the majority is stupid. Be with the smart even if only a small amount of people are smart." This is what Buffett refers to as data-driven investment analysis (read here). This is where things start to get interesting.

It's true foolish people can be annoying. Some people still type their lies. I think some of them are there to mislead people with the wrong information. This becomes an opportunity (at times) to send empirical data against their arguments. For example, any wrong information against FDIs can be countered with the empirical studies presented by great men like the late Lee Kuan Yew and Kishore Mahbubani. That's why I wrote an article regarding Mahbubani vs. Hilario G. Davide Jr. on which grandpa is worth listening to about economics (read here). Mahbubani knew how to make a nation prosperous. Davide Jr. took part in framing the 1987 Constitution but has failed to provide economic reforms to undo the damages done after the fall of the late Ferdinand E. Marcos Sr.

Just reading about how stock prices dropped due to panic-selling can be a golden opportunity. For cost averaging, it means that the sum of money spent for the month will incur more units as time in the market increases. For value cost averaging, it means it's time to buy some more units with a bigger amount. An investor may invest PHP 1,000.00 per month but with the crash now--it might be good to invest PHP 3,000.00 or higher for the month. I'm even thinking that I might buy a little more for my ATRAM Philippine Equity Smart Index Fund to take advantage of the dip.

I could imagine what could happen to panic sellers. I could have my peace of mind "panic-buying" instead of panic-selling. Let's say that these guys sold at a loss, decided to play Axie Infinity instead of continuing the investment with AXA, or buying Axies instead of indexes (read here). I guess they're bound to realize they've lost more money than they could earn. They probably never realized that fluctuations are part of the stock market. They could've decided to buy more. It's possible some of them sold at a loss because of poor money habits or desiring to get rich faster than usual. Meanwhile, those who take advantage of the fluctuations may have higher rewards when the bull market arrives. Those who panic-sold have no one but themselves to blame for their incredibly huge losses.

References

Websites

"‘Panic selling’ leaves Philippine shares stranded in bear market" by Miguel R. Camus (September 29, 2022)
https://business.inquirer.net/364997/panic-selling-leaves-ph-shares-stranded-in-bear-market

Get Stuck with EDSA, End Up Like Nokia

Yes, we should never forget what history teaches us. A classmate of mine, back in high school, wrote a simple and blunt essay called "History: A Teacher". I doubt he still has a soft copy, given it was already more than 20 years ago. I'd like to quote Duterte critic Andrew James Masigan wrote this in Philippine Star --something that should remain relevant: I would never undervalue the 1987 Constitution. It dismantled the legal framework of a repressive regime and established the democratic institutions we enjoy today. For this, I am grateful. The 1987 Constitution was crafted with the best of intentions. It sought to put the Filipino first in all aspects of governance and to level the playing field amongst sectors and peoples. But it is far from perfect. It failed to consider the importance of foreign capital and technologies and the stiff competition we would have to face to obtain them. In short, its economic provisions were short-sighted . So despite the Constitut...

#SahodItaasPresyoIbaba Economics' Bad Accounting

I would like to apologize in advance to my readers. The picture I'm presenting is in Tagalog, and not all my readers speak Tagalog. I would translate the picture's text into English for convenience. It says: "Ano ang bumubuo sa mga presyo?" means "What comprises the price?" "Gastos ng materyales" means materials expense "Gastos sa kasangkapan" means depreciation expense ""Gaston sa pasahod" means salary expense "Kapitalista" means capitalist Renta is well, rent "Kayang pababain ang presyo" means "Prices can be lowered". It says that capitalists (industrialists, landlords, bankers) and elitist governments are part in the gross profit. Get rid of excise taxes (either permanently or temporarily) for the prices of goods and services. In the times of crisis, in the burden of sacrifices, we need to be watchful for capacity. Whatever savings for times of difficulty by the workers and countrymen, the...

Past Chinese School Education in the Philippines was Based on "Sǐ Jì Yìng Bèi"

Chinoys of my age (and older) may remember these textbooks. I called them as the "symbol of trauma". It was memorizing something without understanding it . One would just memorize (without understanding it) because it was typical. Not being able to memorize what was assigned? Get a bad grade? One can expect physical punishment like hitting the hand with a ruler or chili in the mouth. Chinese language teachers are stereotypically strict . The language textbooks (above) are what were used during the 1990s to the early 2000s. As I wrote it, the Sinjiang textbooks aren't effective in teaching Mandarin , in a world where Mandarin has over a billion speakers! There's a Chinese proverb that says, "死記硬背 sǐ jì yìng bèi" or "Memorize to the point of death". That's exactly what those textbooks are. Memorize to the point of death! Okay, it may sound exaggerated. However, that's how Chinese language teachers in the Philippines were made to teach the ...

Migrante International's Really Bad Economic Literacy

March 17 (which is tomorrow) seems to be an unofficial holiday for some people, right? I'm sickened that the late Flor Contemplacion has been treated like she's some national heroine (and thankfully, tomorrow isn't a holiday) even after Singapore had proven her guilt. A movie was made by Joel Lamangan called The Flor Contemplacion Story . The call for Migrante (Migrant) International has been to remember Flor even after several years. What's not too surprising was to learn that Flor's sons were all arrested for drug-related charges. Even her eldest son died while in prison. You have Migrante International wanting to end the labor export policy. However, a post by Migrante really shows how this group fails basic economics. I will not post the whole press statement but one part that made my eyes roll. >> Further opening the country’s economy to foreign ownership and control will worsen the exploitation of our people and the environment without creating a susta...

"Filipino First Policy" Has NO PLACE in the Rising Asian 21st Century

I guess nobody saw the Asian 21st Century coming, right? China was once a poor nation but look at it now. Vietnam was once a poor nation but look at it now. Singapore was once a poor nation but look at it now. The late great Lee Kuan Yew wrote his book From Third World to First . I'm afraid some people have been using it to go against the presidency of Ferdinand R. Marcos Jr. while ignoring what else Lee Kuan Yew had to say. Lee Kuan Yew described the Filipino press to be rambunctious on pages 304-305 which I agree. I'm afraid that the Filipino press may have had a hand in getting rid of any economic or political reforms that could help the Philippines. Yet, one policy has been holding back the Philippines for decades and yes, it's the Filipino First Policy . Reviewing the Filipino First Policy and why it has no place in the rising Asian 21st century I remembered how the values education subject taught Carlos P. Garcia's stupid Filipino First Policy as a Filipino value...

Remembering the Late Jesse Robredo's Quote on Systems That Force People to be Good

It's been some time since Jesse M. Robredo died too soon. Hopefully, his wife Atty. Maria Leonor Gerona-Robredo is true to her word, in her willingness to amend the 1987 Constitution of the Philippines, for the sake of foreign investments. It's a shame I never wrote about the late great man. The CoRRECT Movement on Facebook gave this important note on Robredo's life. Robredo said, "It's not enough for an official to be good. There has to be a system that forces them to be good." Whether or not Robredo was for charter change or a few constitutional amendments, I can't tell. For some racists, let me remind them that Robredo's real surname is Lim and his paternal grandfather is the late Lim Pay Co. In terms of Robredo's credentials (and I tend to sometimes brag about the credentials of those I quote), here's what the City Government of Naga website says: He is an Edward Mason Fellow and a graduate of Masters in Public Administration at the John...

Filipino First Education Created the Fixed Mindset Over Growth Mindset Mentality

Tomorrow is Bonifacio Day. It's effortless to say that Filipino First Policy works. I wouldn't be surprised if Andres Bonifacio gets used as a poster boy. However, Bonifacio worked for British and German investors . I'd like to talk about how decades of Filipino First Policy compromised our education system. Some idiot on Facebook said which I'll paraphrase to avoid getting personal. The idiot said, "If you let foreigners invest here, can Filipinos afford it?" The same idiot also scorns the law of supply and demand (read my post discussing why that's plain silly here ). People who believe in #SahodItaasPresyoIbaba must first prove it works by opening such stores nationwide, to show that the Philippines doesn't need FDI to succeed (read here ). Of course, I can expect them to say "It's the government's responsibility to raise salaries without raising the prices of goods." That's just plain bad accounting and finance too! Andrew Ja...

Refuse to Do Business with a Person Who Looks Down on Menial Work

If there's any reason why some people are angry with the rich--it's because of rich people who look down on the poor. Some people are born rich without knowing the struggles of the one who originally acquired the wealth. Some rich parents make the fatal mistake of making their children feel entitled. Meanwhile, some rich parents make their children do the right thing by not waiting until things get too far. Some rich parents end up making their children attend middle-class schools, do summer jobs, work as employees in their own businesses, and teach them the value of wealth, especially by narrating the struggles before they got wealthy. In looking for a business partner, I feel it's very important to look at the attitude of these people. How do they treat people who do menial work? I could imagine looking forward to a business contract. However, it turns out that the potential business partner is a spoiled brat . Maybe, it's already a red alarm if I'm invited to an ...

Dayang Daya: The Case of Five-Six Lending Services Roaming to Collect Christmas/New Year Debts by January

I remember during the late 1990s when the song "Dayang Dayang" (Princess of the First Degree) was played on the radio. The origins are often debated whether or not it was from Muslim Mindanao or from the other neighboring countries. The Philippines has had settlers also from Malaysia and Indonesia. A parody cover by the late Yoyoy Villame was called Dayang Daya or Cheating Cheating. It was probably making fun of the Indian five-six lending business. Indians tend to be called Bombay because of the location known as Mumbai. I even made the mistake of referring to Indians as "Bombays" more than once. The song "Dayang Daya" does talk about the five-six lending services. It does target a lot of gullible people. I even became nearly distrustful of Indians in college for quite some time. I wrote how a Merry Christmas may lead to an Unhappy New Year due to debt burden (read here ). I tend to say to myself, "Somebody hasn't paid their debt!" every ti...

Will Opening the Philippines to 100% FDI Lead to Foreign Monopoly?

Monopoly - Hasbro I was looking at the CoRRECT Movement Moderated Public Forum on Facebook. I found more illogical arguments by a certain troll in the forum named Juan Dalisay Jr.--the writer of the Superphysics One website. However, this isn't the first argument I ran into as I've seen arguments from Kabataan Partylist and the League of Filipino Students on Facebook. They have claimed that foreign direct investments (FDIs) will lead to exploitation, only they will get rich, that they will rape resources, and an even funnier claim is that they will lead to monopolies . Some people, even fools, should be allowed to defend themselves at CoRRECT Moderated Public Forum than just live in their echo chamber of Facebook pages. However, Kishore Mahbubani and the late Lee Kuan Yew had long disproven that . The testimony is in the book From Third World to First by Lee himself. Mahbubani said foreign investors create jobs, bring capital, and teach new skills. I wonder if protectionist adv...

Shaun T. Dy's Business & Economics Perspective Blog

Search This Blog