Skip to main content

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 
Labels:

Popular posts from this blog

The Idiocy of Typing Anti-FDI Rants Using IMPORTED Devices, IMPORTED Platforms, and IMPORTED Social Media

Bulatlat It's very easy to open Facebook (or any related platform) and find lots of stupidity , right? There have been idiotic comments I find on Facebook such as FDI is this and that. We can find "thought leader groups" such as Alliance of Concerned Teachers, Anakpawis, Anakbayan, Bayan Muna, IBON Foundation, Kabataan Partylist, League of Filipino Students, and Philippine Anti-Fascist League (PH Antifa) who keep ranting about FDI as this and that. I even remember somebody dared to say that FDI caused Egypt to dry up. Ironically, North Korea and Venezuela, two protectionist countries, have very bad pollution problems. I'd blame it that they don't have the money to do a clean-up drive. How can you clean up a polluted river without the right equipment? How can you expect better power efficiency with outdated equipment that keep coughing up, cough, cough, lots of black smoke?  All the talks on social media can be very funny. The big irony is that all calls for "...
Read more

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...
Read more

It's Incredibly Frustrating to Discuss Economics with an Overspender

Overspending is just bad economics, isn't it? Economics is defined as the following for the sake of a review of high school basics: Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. Economics focuses on the actions of human beings, based on assumptions that humans act with rational behavior, seeking the most optimal level of benefit or utility. The building blocks of economics are the studies of labor and trade. Since there are many possible applications of human labor and many different ways to acquire resources, it is the task of economics to determine which methods yield the best results. Economics can generally be broken down into macroeconomics, which concentrates on the behavior of the economy as a whole, and microeconomics, which focuses on individual people and businesses. It had me thinking of 2016 wh...
Read more

[UNPOPULAR OPINION] Why People Power Anniversary Should Be a Special Working Day Instead

  As a blogger, I shouldn't turn on the PC in hopes of becoming popular . It should be to turn on the PC and blog to make a difference . Right now, I think about the controversy when President Ferdinand "Bongbong" R. Marcos Jr. declared the 1986 EDSA Revolution's anniversary as a working holiday . The call for some of the "minority lawmakers" is that they want to return the People Power Anniversary to a regular holiday once more. There are times I feel like, "Should we let it be a regular holiday again, so as not to repeat the Marcos dictatorship?" Sadly, the real answer is that the Philippines has been relying too much on EDSA , so it's practically ending up like Nokia . I was thinking about the reality of February being the most hectic month. February only has 28 days (and February 25 is near the month's end ). I thought that the Philippines also has too many national holidays more often than not. In fact, the Inquirer article written by...
Read more

Talking Economics with an Overeating Glutton

Two years ago, I wrote an entry about why discussing economics with an overspender is frustrating . Now, I was looking at certain fat people who say really dumb things about economics. Just recently, I was looking at a certain fat idiot (fortunately, he only has 1K+ followers) who posted on Facebook that not only will the parliamentary system cause the Philippines to become a dictatorship, but he also says that changing economic provisions will cause the Philippines to collapse and the country to fall into the hands of foreigners. I won't name the person out to avoid getting personal. However, the person is apparently very fat and he blames capitalism day in and day out. The person even says that businessmen do nothing and it's the employers that do everything. Has that fat slob ever heard that businesses are run by bosses and that if the bosses do screw up, they're the ones who are the most answerable? The employees are the cogs and the boss runs the cogs. I was looking at...
Read more